Oil, gas and Iran economic analyst
Iranian President Masoud Pezeshkian has criticized the lack of logic in importing gasoline at high market prices only to sell it domestically at much lower, heavily subsidized rates.
Iran has struggled with a growing gasoline deficit since 2022, importing at least 1.5 billion liters (396 million gallons) of gasoline during the last fiscal year, which ended on March 20, according to an official Oil Ministry document obtained by Iran International.
Officials report that the gasoline deficit has worsened this year. Additionally, Iran is grappling with the daily smuggling of 5 million liters (1.32 m gallons) of gasoline to neighboring countries, because of the cheap subsidized price.
The Iranian government has not disclosed specific details about the volume and value of gasoline imports. However, President Masoud Pezeshkian estimated the annual import cost at $8 billion annually during an interview last month. Currently, the Free on Board (FOB) price of gasoline in the Persian Gulf exceeds 55 cents per liter, while Iran sells rationed gasoline (60 liters per month per vehicle) at just 15,000 rials (2.5 cents) per liter, and non-rationed gasoline at 5 cents a liter.
Pezeshkian's remarks suggest that a significant increase in gasoline prices may be necessary—a sensitive issue that previously triggered widespread protests and a brutal crackdown by the Islamic Republic in November 2019.
His comments also come against the backdrop of a sharp rise in the US dollar exchange rate, from 110,000 rials to 600,000 rials per dollar since November 2019, further highlighting the disparity between domestic and global gasoline prices. Additionally, the devaluation of the rial is a consequence of the Islamic Republic's economic policies, including systemic inefficiencies, a lack of investment in new refineries, outdated infrastructure, and the impact of Western sanctions. Blaming the public for the gasoline crisis under these circumstances is therefore unreasonable.
Last year, Iran's base gasoline production was approximately 97.13 million liters per day (ml/d). After blending with a significant amount of non-standard additives, this volume increased to 111 ml/d, while daily consumption stood at 115 ml/d. However, recent statements from oil officials suggest that gasoline consumption in recent weeks has been closer to 121 ml/d, with a spike in August due to a large pilgrimage to Iraq.
Pezeshkian’s call for higher gasoline prices comes despite the Oil Minister’s announcement on August 22 that no pricing changes are currently being considered to address the gasoline imbalance. Pezeshkian further stressed that Iranian economists should protest against the flawed policies being implemented, as the low price of gasoline contradicts economic principles.
One key factor deepening Iran's gasoline deficit is the lack of new refineries being added to Iran's production capacity since 2019. Additionally, around one million high-fuel-consumption domestic vehicles have been introduced annually into the market in recent years.
Pezeshkian, without acknowledging the absence of new refineries and the inefficiencies of existing ones—where one-quarter of crude oil is still converted into low-value products like bitumen and mazut (six times more than modern refineries)—criticized the low gasoline prices. He lamented, "I don’t have money for wheat, I don’t have money for livestock inputs, I don’t have financial resources to pay retirees, yet we buy gasoline at a high price and sell it cheaply."
According to estimates by the International Energy Agency (IEA), Iran had $52 billion in hidden fossil fuel product subsidies in 2022, including natural gas and oil products such as gasoline. One-fourth of this figure represents the difference between Iran’s consumer gasoline price and global prices. In 2022, Iran ranked second worldwide, after Russia, with $127 billion in fossil fuel subsidies. The IEA has not yet published updated figures.
“Let us not place our hopes in the enemy, nor should we await their approval for our plans. This does not preclude engaging with them when necessary—there’s no harm. However, do not rely on them, and trust in the enemy is misplaced," Khamenei said on Tuesday.
In his first meeting with President Masoud Pezeshkian's cabinet, Khamenei fueled speculation of a possible shift toward a softer foreign policy, though not without his trademark dose of skepticism.
"No plan is without its challenges," he remarked. "For some, the instinctive response to obstacles is a retreat, but this is a flawed approach. Instead, one must either overcome the hurdle or find a way to circumvent it. While there may be times when a tactical retreat becomes necessary after all avenues have been explored, it is crucial not to abandon one's position or resolve at the first sign of difficulty," Khamenei added.
Since Masoud Pezeshkian's election, murmurs of dialogue with the West have grown, signaling a potential shift toward negotiations on nuclear issues. While Tehran's rhetoric fluctuates, it remains steadfast on red lines like terrorism sponsorship. How they intend to lift crippling sanctions while maintaining these positions is yet to be seen.
Two weeks ago, Khamenei had adopted a more aggressive yet still ambiguous tone. He condemned the "enemy’s psychological warfare" intended to dissuade Iran and warned that any retreat—whether military, political, or economic—that lacks “tactical prudence” would invite "divine wrath," as cautioned in the Holy Quran.
At Tuesday’s meeting, Khamenei also confirmed he had vetted the ministers well before their parliamentary approval.
"The President sought my counsel in selecting the ministers. I endorsed several, emphasized the importance of others, and remained neutral on many whom I was unfamiliar with," Khamenei said on Tuesday.
Last week, in his final address before the cabinet vote, Pezeshkian revealed that Khamenei approved every minister and personally persuaded at least one hesitant candidate to step up.
In the first meeting of the new cabinet, Khamenei confirmed the claim but with a nuanced twist, noting that while he had reviewed the list, he was unfamiliar with many of the nominees—this subtle remark left room for future maneuvering, a hallmark of Khamenei’s strategic ambiguity.
Historically, it has been understood that Khamenei plays a decisive role in selecting key ministers—specifically those of Intelligence, Interior, Defense, and Foreign Affairs. Yet, no sitting president had previously admitted to such direct pre-approval.
Pezeshkian’s openness, paired with Khamenei’s carefully measured response, has led to renewed scrutiny of the system's democratic pretensions. Some reformist observers speculate that Pezeshkian might be laying the groundwork to shift blame to Khamenei if his administration falters. However, Khamenei has never shied away from disowning those he's endorsed—most notably former President Mahmoud Ahmadinejad, whom Khamenei staunchly defended in the face of the 2009 protests, despite widespread allegations of electoral fraud.