Iran Candidates Clash Over Possible Fuel Price Hikes

The thorny issue of a possible fuel prices hike has taken the centerstage in the debates between supporters of the pro-reform Masoud Pezeshkian and ultra-hardliner Saeed Jalili, and among eligible voters.

The duel began Sunday with Jalili supporters claiming on social media that fuel prices would increase several-fold if Pezeshkian wins the runoff elections on July 5, and reach as high as 250,000 rials per liter (around 40 cents).

Currently rationed gasoline is sold at 15,000 rials per liter (2.5 cents). The cost of anything used over the rationed amount (From 25 liters per month for motorcycles and 60 liters for personal cars to 500 liters for ambulances) is 5 US cents per liter.

This heavily subsidized price, coming to less than 10 cents a gallon, is the second cheapest in the world and costs the government tens of billions of dollars per year. Average gasoline prices in the region is closer to $1 per liter.

Jalili’s campaign officials and supporters’ intensive attacks on Pezeshkian’s campaign were followed by a Jalili tweet on Monday. The image posted by Jalili with no comment looked like the map of an Internet Taxi application with Pezeshkian as the taxi’s passenger going to the presidential office. The caption read “Will increase transportation costs” to suggest that Pezeshkian’s government intends to increase fuel prices to 250,000 rials (around 40 cents) per liter.

“Mr. Jalili, I haven’t proposed any plans for increasing gasoline prices but you must say if the price of gasoline will be less than 600,000 rials (nearly $1) after your government implements your ‘The One Plan’,” Pezeshkian’s official X account responded to Jalili shortly after.

Jalili has proposed "The One Plan" to distribute energy subsidies equally to all Iranians, regardless of income, instead of the current income-based cash subsidies in 2021 by allocations of “One” units which could be used like cash to buy fuel or electricity instead of money. Fuel should be sold at international rates after the introduction of the plan.

The plan, he argued, would allow individuals with less energy consumption to sell saved units at any price through a mobile application or treat them as investments for the future. According to information on Jalili’s website, One units can also be used to pay water bills.

Neither Jalili, nor his campaign had made any reference to the plan during the campaign before Friday’s low turnout elections in which he came second after Pezeshkian but his campaign aides and supporters are now extensively promoting the plan as one of Jalili's measures to improve the lives of low-income Iranians.

Jalili formed a shadow government during the presidency of moderate Hassan Rouhani and maintained it during Ebrahim Raisi’s administration to which he appears to have proposed his plan.

Raisi’s government did not implement The One Plan and the price of gasoline remained the same as in 2019. A mini model, however, was introduced in the Persian Gulf free economic zone Island of Kish as a pilot in March 2022 for four months.

Not only economists, but even hardliners media including the Revolutionary Guards (IRGC) linked Javan newspaper criticized the pilot plan in Kish Island and said it had increased fuel usage instead of decreasing it.

Fuel gasoline has always been highly subsidized by the government. Smuggling of gasoline and other fuel in huge quantities to neighboring countries including Iraq, Afghanistan, Turkey, and Pakistan where it is much more expensive is a serious problem for all Iranian governments. Some economic experts say as much of 20 million liters of fuel is smuggled out of Iran every day.

The quadrupling of fuel prices by Mahmoud Ahmadinejad’s government in 2007 sparked riots, particularly in Tehran where petrol stations were torched by angry protesters. Hassan Rouhani’s government increased fuel prices three times. The last increase in November 2019 the tripling of the prices led to extensive protests across the country that lasted a week. Hundreds were killed and security forces seriously injured thousands during the crackdown on protesters.