06/11/24
Iran sounds alarm on gasoline shortage
Dubai, 6 November (Argus) — The new Iranian government has sounded the alarm on
an emerging gasoline shortage that looks set to get worse unless new policies
are introduced to clamp down on runaway demand growth. Presenting a draft budget
for the Iranian year starting on 20 March 2025, Iran's President Masoud
Pezeshkian criticised the existing gasoline rationing system, calling it one of
the major hurdles for the proposed bill. Iran has, since 2007, allowed citizens
to buy base levels of gasoline at subsidised prices and any additional at a
higher price. But the system failed to cap demand and imports sufficiently. In
the proposed budget the government has signalled plans to ease shortages, but
increasing prices is not on the agenda. A cut to subsidies in 2019 sparked
nation-wide protests . "Today the cost of [producing] gasoline — which includes
refining costs, transportation costs, and gas station maintenance costs — is
about 8000 tomans (80,000 rials)," Pezeshkian said. But consumers only pay 7.5pc
of the actual price of gasoline, according to Iran's oil ministry. Iran's
gasoline consumption has reached a record high of around 750,000 b/d in the
first seven months of the Iranian year that began on 20 March, according to the
ministry. Domestic refinery capacity of 670,000 b/d has been unable to satisfy
this. To bridge the gap Iran has turned to imports, which has not been easy for
the heavily sanctioned country that buys the fuel at market prices. "Around 90
trillion tomans [$1.3bn at the free market rate] was spent to import gasoline
this year, which could be increased to 130 trillion tomans [$1.9bn] next year if
the [demand growth] trend continues," Pezeshkian warned. Supply-side response If
Tehran is unwilling to raise pump prices it will have to add more supply. Work
in underway to bringing online an additional fourth train at the Persian Gulf
Star (PGS) condensate splitter, and on a 60,000 b/d splitter that made up just
one part of the now shelved Siraf project. Consultancy FGE expects these
projects to be commissioned by the end of 2025 or early 2026 and "potentially
close the gap." The newly-appointed head of state-owned refining company NIORDC,
Mohammad Sadegh Azimifar, said using CNG-powered vehicles could reduce the need
for more gasoline production. "There are good legal capacities in the country
for the development of CNG, including the approval of the energy optimization
fund," he said. But CNG has lower mileage and energy content, and CNG filling
stations are beset with long queues. "If you have a CNG car, you can only drive
it for a day and one will have to wait in long queues to get it refilled, only
for it to last for another day", said FGE's Middle East managing director Iman
Nasseri. Iran has sufficient reserves of natural gas and LPG, but both of these
failed to emerge as a good alternative fuel, he said. The Pezeshkian
administration has repeated calls to increase use of public transport and
modernise the country's vehicle fleet. But metros and buses are being utilised
at maximum capacity and private vehicles are a favourable option in a country
with the second-most discounted fuel prices in the world, Nasseri said. Iran is
yet to tackle rampant fuel smuggling, with market sources indicating gasoline
continues to be illegally shipped to neighbouring countries like Pakistan,
Afghanistan and Kazakhstan. Earlier this week, authorities seized around
220,000l of smuggled fuel in several warehouses in Mashhad. While the
administration strongly rebukes subsidies, with new vice president Mohammad Reza
Aref calling them "unreasonable", they continue to look at solutions that does
not include any increase in retail prices, in fear of a repeat of the 2019
protests. But with a lack of infrastructure to capitalize on CNG and limitations
in public transportation system, the government may have no choice but to
reconsider. By Rithika Krishna Send comments and request more information at
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