Friday, March 9, 2007

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Talk about addiction to cheap oil

The Financial Times' Gareth Smyth reports that Iran is starting to tighten its belt in anticipatio of serious economic sanctions. Of course, one person's "belt-tightening" is another person's "pitiful reduction of massively inefficient subsidy.":

Iran’s parliament this week set May 22 as the day when the country’s 15m motorists lose access to unlimited cheap fuel.

Pump prices, frozen for three years at 80 tomans (or 9 cents) a litre, have boosted consumption far beyond the capacity of Iran’s oil refineries and meant that 40 per cent of petrol has had to be imported.

With Iran facing further UN sanctions over its nuclear and missile programmes, politicians have opted to dampen demand by a combination of rationing and higher prices.

Parliament decided on Wednesday to limit annual petrol subsidies to $2.5bn, and Iranian news wires have reported the new rationed price will be 100 tomans (11 cents) a litre, with extra fuel sold at a higher price.

Deputies left the government to decide by April 20 on ration quantity, the price of un-rationed petrol, and the method of rationing, likely to be the use of ‘smart cards’.

The price of petrol has been regarded as politically sensitive, especially as many Iranians run cars as unofficial taxis to supplement low incomes or survive unemployment.

Basic commodities – like bread, electricity, gas and medicines – are subsidised by the government, and with Iran sitting on the world’s second highest oil reserves, many Iranians see cheap petrol as a birth-right.

Mahmoud Abtahi, a deputy, warned a 25 per cent increase would bring a “severe shock because petrol is the life blood of the economy” and urged parliament to support low-income groups.

posted by Dan on 03.09.07 at 10:14 AM


Worse, they have to deal with 300 coming out. Not a good day to be an Iranian.

posted by: Mark Buehner on 03.09.07 at 10:14 AM [permalink]

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