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Iran hikes gasoline prices amid cash crunch from US sanctions


Pump price hiked by at least 50% under quota system

Lead-free gasoline price jumps by 200%

Tehran — Iranians woke up Friday to sharply higher gasoline prices and rationing, as the government moved to help alleviate an increasing cash squeeze from US sanctions.

Regular gasoline now has two prices, with a consumption limit on the cheaper price, the state television reported quoting the government. Car owners can purchase 60 liters/month at 15,000 rials/liter, a 50% hike. Beyond this quota, consumers will have to pay double the price.

Lead-free, or "super" grade, gasoline saw nearly 200% increase from 12,000 rials/liter to 35,000 rials/liter, and no dual price.

US sanctions have caused Iran's crude and condensate exports, its main revenue source, to almost completely dry up.

US officials estimate some 2 million b/d of Iranian exports have been cut off from the market, though analysts say Iran continues to export some volumes clandestinely.

But the gasoline price hike will help Iran withstand US sanctions pressure, by causing a decline in domestic gasoline consumption, allowing the country to increase exports at higher prices, said Henry Rome, an Iran analyst with the Eurasia Group.

"While purchasing gasoline is subject to US sanctions, the product is much more difficult for the US to track and stop, as it can be transported easily on trucks and vessels directly to consumers," Rome said in a note Friday.

During an oil industry conference in Abu Dhabi Tuesday, Frank Fannon, the head of the US State Department's Bureau of Energy Resources, said the US was deepening its "maximum pressure" campaign on Iran, including a potential increase in enforcement on exports of refined products.

Iran's exports of refined products are already sanctionable under US law, but the Bureau of Energy Resources told S&P Global Platts that such penalties have rarely been enforced, with the focus primarily on crude shipments.

"We are now looking more broadly for potential targets to sanction for purchases of refined products," the bureau said in a statement to clarify Fannon's remarks. "We are not just sticking to crude oil."

Sara Vakhshouri, president of SVB Energy International, said US sanctions, along with International Maritime Organization emissions rules, were expected to cause a reduction of refinery capacity in Iran or sales of high-sulfur fuel oil at large discounts.

"Higher gasoline prices could help with offsetting this refinery loss," Vakhshouri said.

Iran's overnight gasoline price rise came as a surprise when publicized late Thursday, though the government and parliament have debated the issue for more than a year.

On Tuesday, Iranian President Hassan Rouhani announced low-income families will be receiving an allowance, a monthly payment, to buy their priority needs, a move that was implemented in the previous Iranian year, too.

The price surge idea was originally aimed at capping the extravagant domestic consumption. Besides private cars, motorcycles, pick-up cars and public transportation vehicles will have to pay more for gasoline and were given a certain quota for the cheaper fee. There was no change in the price of gas oil or CNG.

-- Aresu Eqbali, with Brian Sheid in Washington,

-- Edited by Jim Levesque,