Can higher fuel prices curb Iran’s smuggling problem?

Detailed summary

The effect of a price increase depends on its size, currency movements, operating costs and how traders obtain supplies. Someone buying fuel lawfully faces a different calculation…

Long queues and empty pumps have brought Iran’s fuel shortages into sharper focus, raising a difficult question: how much would charging consumers more change where the country’s subsidized fuel ends up?

Esmail Saghab Esfahani, a vice president who heads the state energy efficiency agency, acknowledged this week that “we really have a supply problem.” He told Iranians they could no longer count on fuel stations to cover their needs and should save part of their monthly ration before traveling.

“All the gasoline the government has, it has given to the people,” he said. “Nothing has been held back to supply more.”

On Thursday night, residents of Bandar Abbas, the main port on the Persian Gulf, blocked a road near a fuel station in the city’s Rajaei district with their cars, protesting long lines and empty pumps. Drivers on the Minab–Bandar Abbas route had protested earlier over the lack of fuel.

The economic argument for higher prices is straightforward. Fuel is inexpensive domestically and costly abroad, making it profitable to move illegally. Narrowing that gap could reduce the incentive to smuggle.

Opening of the article, excerpted from Iran International. To read the rest, open the article on the publisher's site.