Iran’s refinery problem reflects global fuel shortage

The National Iranian Oil Company expects oil revenue to reach a record of more than $52bn in the current financial year. The problem is that much of the state’s revenues are draining away in subsidies to support a largely closed economy lacking foreign investment. One of the most pressing challenges to the government lies in the country’s lack of refined fuels.

The Islamic Republic produces 44 million litres of refined fuel a day which provides less than half of domestic requirements. It is a vulnerability that Washington has indicated it will use as a lever in its efforts to curb Iran’s nuclear programme.

Iran finally chose to impose full fuel rationing at the end of June. Private motorists are now allowed to purchase just 100 litres a month. The sudden move allowed no time for hoarding and there has been anger on the streets at the rationing decision, with high inflation already affecting the price of basic commodities, even though Iranian petrol is still sold at about one fifth its economic cost at 11 US cents a litre.

The move is scheduled to last up to six months. Iran had faced exhausting its annual budget for gasoline products by the beginning of August. Without the imposition of rationing, Iran’s fuel import bill could have nearly doubled to $9.5bn, France’s Petroleum Institute estimates.

Skyrocketing local consumption, as well as a huge illicit trade in subsidised fuel particularly across to Afghanistan and Pakistan, have eaten away at fuel stocks. Iranian fuel is also found in Turkey and Iraq where the price per litre is up to 12 times more expensive. Iran is also in regional terms a major car producer with a million units a year produced, though many of the nation’s vehicles are older designs and heavy on fuel use.

AME Info