The Scenario of Increasing Gasoline Prices, This Time Under the Pretext of Controlling Fuel Smuggling?

The struggles over increasing energy carrier prices in Iran have entered a new phase due to the rising amount of fuel smuggling from the country, coinciding with the fall of the rial's value. Although the parliament rejected the government's proposal to increase energy carrier prices in the 2018 budget bill, the Sixth Development Plan has nonetheless allowed for this price increase. The government claims that by raising gasoline prices by 500 tomans, it intends to allocate 17 trillion tomans in revenue from this increase to improve dilapidated urban areas, modernize public transportation, and develop employment. The newspaper Shargh predicted in August of this year that the statements of government officials regarding the relationship between increasing gasoline prices and reducing fuel smuggling, and even road accidents, are a way to prepare public opinion for the government's legal authority to raise gasoline prices. Critics accuse President Hassan Rouhani's government of being inclined to raise gasoline prices while being indifferent to the increase in diesel prices following this decision and its direct impact on citizens' livelihoods and the prices of various goods and services. Some members of parliament also say that while Rouhani's government views collecting taxes from gasoline sales as a reliable financial source for funding its projects, the public cannot bear an increase in gasoline prices under the current economic conditions. Several experts confirm the impact of changes in gasoline prices on its supply and demand but say that the natural decrease in demand following a price increase will also lead to another factor: 'public protests.' The average gasoline consumption in 2017 was nearly 80 million liters per day, which sharply increased during the Nowruz holiday in 2018, showing a 9 percent growth. It seems that given the tightening of U.S. economic sanctions against Iran and the natural annual growth of gasoline consumption by seven to eight percent, one of the ways for the Twelfth Government to secure its budget needs is through taxes from gasoline sales. This statistic becomes significant when we know that there are over 19 million 'fuel-guzzling' vehicles in Iran, each consuming an average of two liters more gasoline daily than European cars. While the cost price of each liter of gasoline for the government is 2700 tomans, considering the 1700 tomans subsidy on its current price, the consumption of two liters more by at least 19 million of these vehicles means the government must pay an additional daily subsidy of 64 billion and 600 million tomans for these 'fuel-guzzling and polluting giants.' The 'good situation' of fuel smuggling and the revival of the fuel card. The increase in gasoline prices, as one of the 'government's ideas,' has not yet been realized despite arguments regarding the increased production costs of this product compared to previous years and the increase in the number of vehicles as another factor in rising consumption. However, government officials have now focused on the increase in fuel smuggling, which has even raised the voices of parliament members. Ali Edyani, a member of the Energy Commission of Parliament, has stated that currently, 'the minimum amount of fuel smuggling from the country is 10 million liters per day.' This representative estimated the daily value of 10 million liters of smuggled fuel at 'about 150 billion tomans daily,' based on a dollar price of 15,000 tomans. Bijan Zangeneh, the Minister of Oil, also reacted to the alarming increase in the amount of fuel smuggled from Iran, stating that 'thankfully, the situation of gasoline smuggling is good and is successfully carried out from all borders.' According to Zangeneh, this issue includes both diesel and gasoline, and therefore, 'we must consider a solution for it.' He did not specify whether his reference to 'solution' meant increasing the price of this commodity, but regarding the revival of the fuel card as another way to 'prevent fuel smuggling,' he stated that the government is examining this issue. The use of a smart fuel card when purchasing gasoline and other petroleum products was mandatory from 2007 to 2015, and among its goals was 'controlling fuel consumption, rationing, preventing fuel smuggling, and obtaining information on regional consumption.' The use of this card, which was once referred to as a massive project, faded over time after the unification of gasoline prices in June 2015 and ended up only with the cards of station owners. However, members of the Islamic Consultative Assembly approved a one-time plan to maintain the fuel card in May 2017, allowing the government to use incentive policies within the framework of laws and regulations to encourage consumers to use the smart fuel card specific to each vehicle. Therefore, it seems that if the government intends to raise gasoline prices again in the near future, the use of the smart gasoline card is justifiable; otherwise, it would be futile. For this reason, parliament members and economic experts say that although the government could not realize the idea of increasing gasoline prices in the 2018 budget bill despite preparing all the prerequisites, the gradual return of this card to stations this year and the news of installing equipment for using the fuel card at dispensing devices indicate the government's inclination to make its use mandatory. Hedayatollah Khademi, a member of the Energy Commission of Parliament, has also reported that the plan for a dual pricing system for gasoline will be reviewed in this commission on October 21. The re-implementation of the smart fuel card system to reduce fuel smuggling and consumption in the country has been reported as one of the main topics of discussion in this regard. Bijan Haj Mohammad Reza, the head of the gas station owners' union, has also stated that the potential use of the fuel card could be the precursor to the dual pricing scenario for gasoline. He assessed this action in line with Hassan Rouhani's statements that 'we will think about gasoline for vulnerable groups.' However, even if the government finally succeeds in increasing energy carrier prices, the question remains as to how much 'endurance' the people have for increasing inflationary pressures, especially in the face of intensified U.S. sanctions against Iran, which are set to squeeze the Iranian economy's lifeblood: oil.