What Are the Various Scenarios for Increasing Gasoline and Currency Prices in Iran?

Farshad Momeni, an economist, has stated that in the past two to three weeks, some key economic officials have held over 30 meetings to prepare the ground for increasing the exchange rate and gasoline prices. He warned Masoud Pezeshkian that a price shock to energy carriers and 'playing with prices' could lead to a 'disaster.' To analyze the various impacts of increasing or stabilizing the price of the dollar and gasoline on Iran's economy, several main scenarios can be examined. Each scenario will have different effects on inflation, economic growth, employment, and purchasing power. These scenarios can be compared in a table to clearly show the consequences of each combination. Economic scenarios: 1. Stability of gasoline prices and dollar rates 2. Increase in gasoline prices and stability of dollar rates 3. Increase in dollar rates and stability of gasoline prices 4. Simultaneous increase in gasoline prices and dollar rates. The potential impacts of these scenarios on Iran's economy are as follows: Scenario 1: Stability of gasoline and dollar prices Inflation: In this scenario, with stable prices, inflation remains largely under control. Purchasing power: Price stability means stability in household purchasing power, but the economy does not experience significant growth. Employment: The labor market remains stable, and no significant changes in employment will be observed. Economic growth: Economic growth will be low or close to zero, as no cost increases are observed in these sectors. Scenario 2: Increase in gasoline prices and stability of the dollar Inflation: The increase in gasoline prices leads to higher production and transportation costs, resulting in increased domestic inflation. Purchasing power: A slight decrease in purchasing power due to increased transportation and related goods costs. Employment: Some sectors, such as transportation and consumer goods production, may face reduced employment. Social dissatisfaction: Limited protests due to increased transportation and fuel costs. Scenario 3: Increase in dollar rates and stability of gasoline prices Inflation: Imported inflation occurs due to increased costs of importing raw materials and essential goods. Purchasing power: A severe decrease in purchasing power due to the rising costs of imported goods and raw materials. Employment: Industries dependent on imports (such as automotive, medical equipment, and technology) face severe employment reductions. Economic growth: Economic recession due to increased import costs and reduced domestic production. Scenario 4: Simultaneous increase in gasoline and dollar prices Inflation: Dual inflation occurs through both increased fuel costs and increased import costs. Purchasing power: A severe decrease in purchasing power due to widespread inflation. Employment: Unemployment in various sectors, including production, services, and transportation, will significantly increase. Income inequality: Class differences will increase, and income inequality will peak. Social dissatisfaction: Widespread dissatisfaction and protests will occur as people face economic pressure from multiple angles. Pezeshkian states that we should not buy gasoline at high prices and sell it cheaply to the public. Overall analysis: Stability of gasoline and dollar prices (Scenario 1) leads to economic stability but has low economic growth. Increasing gasoline prices with a stable dollar (Scenario 2) creates more domestic inflation and has limited effects on purchasing power, but it can lead to recession in fuel-dependent industries. Increasing dollar rates with stable gasoline (Scenario 3) leads to imported inflation and a decrease in purchasing power, causing a more severe economic recession. Simultaneous increases in gasoline and dollar prices (Scenario 4) represent the worst-case scenario, as dual inflation severely reduces people's purchasing power and increases social dissatisfaction, with a high likelihood of an economic crisis. Severe government repression and the risk of 'underground' protests.