Iran raises gasoline prices on itself

Marketplace Staff Mar 7, 2007

Iran raises gasoline prices on itself

Marketplace Staff Mar 7, 2007

KAI RYSSDAL: The United Nations has been leaning on Iran to freeze its uranium enrichment program. But while the U.N. has been turning up the diplomatic and economic pressure, it has consciously steered clear of Iran’s biggest asset: its oil.

Today, the Iranian Parliament turned up the heat on its own. It raised the price of heavily subsidized gasoline — from 34 cents a gallon to about 50 — and moved toward rationing supplies. There are still a few bureaucratic steps to go, but Iranians could soon be paying more and getting less.

We called reporter Roxanna Saberi to see how this going down in Teheran. Roxanna, hello.


RYSSDAL: Isn’t Iran one of OPEC’s largest oil producers? And if so, why does the government feel the need to ration gasoline?

SABERI: Iran is, as you said, one of OPEC’s largest oil producers. It’s OPEC’s second-largest oil producer and the fourth-largest oil producer in the world. But the problem that exists, according to a lot of economists, is that gas has just been too inexpensive. And it has caused them to consume a lot of gasoline and the increase in their gas consumption has been about 10 percent a year, which is quite a lot. And it has to import, actually, 40 percent of that, even though it has such high oil reserves. And so the government ends up paying a lot of money for all this — billions of dollars every year for gas imports — while it has subsidized gas at home. It has encouraged smuggling of gasoline to neighboring countries. And not to mention it’s also terrible for the pollution.

RYSSDAL: There is all this domestic oil production. Why then do they have to import gas? Are there no refining stations in Iran?

SABERI: There are refineries here, but there’s not enough refining capacity. There’ve been several reasons for this. One is during the Iran-Iraq war during the 1980s, a lot of those refineries were damaged. So it took time for Iran to rebuild some of them. Also, perhaps, domestic policies in terms of the conditions that foreign investors get for investing in these refineries.

RYSSDAL: What’s the reaction been today on the streets when people heard about this increase in process and a tightening of supply?

SABERI: A lot of ordinary Iranians are not happy about an increase in prices. But some other Iranians say that it’s necessary, because they also agree that it has led to a lot of waste. I think the major dissatisfaction will happen . . . one, it depends on what the quota will be set at, how many liters of gasoline Iranians will be able to pay at the lower price before they have to pay a higher price if they go beyond that quota. And also if it will lead to inflation in other areas of the economy.

RYSSDAL: What’s the domestic political implication here? Didn’t President Ahmadinejad come to power, in part at least, on the oil wealth and promising to share it with the population?

SABERI: He did. He made a lot of promises, and some Iranians believe that he still needs time to implement them. But others are dissatisfied. And actually, I think historically, Iranians have had this expectation that because they’re country is so rich in resources, why should they have to pay high prices for gas at the pumps?

RYSSDAL: If you went out on the street today and asked people what they thought about the Iranian economy, what would they say?

SABERI: Well, I don’t think that I would . . . have ever heard anybody here say that the economy is in a good situation or that it’s getting better. And I don’t know if this is something that’s part of their outlook or part of their culture to kind of complain about the economy or . . . but I do have to say that the economy is facing a lot of challenges here, too. Iran’s economy has a lot of potential. There are a lot of young people who are educated, they’re trained, there are a lot of natural resources here, et cetera. But Iran’s just not tapping into this potential. There’s a lot of inflation — 15 to 16 percent a year — and a lot of people are working two to three jobs, and they say they just can’t make ends meet.

RYSSDAL: Roxanna Saberi in Tehran, Iran. Roxanna, thank you for your time.

SABERI: Thank you for having me.

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