In a country with vast fuel reserves, Diesel is sold at incredibly low prices, cheaper than water.
No Iran, the prices of basic products can be quite surprising. For example, in some places, buying a liter of diesel costs less than buying a liter of water. In other words, in these places, water is more expensive than fuel.
An extremely cheap fuel
O Iran, recognized for its vast reserves of oil and natural gas, presents an economic peculiarity that attracts attention: the extremely low price of fuel, often lower than that of bottled water.
Holder of the third largest oil reserves and the second largest natural gas reserves in the world, Iran has abundant energy resources.
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These reserves allowed the country to maintain a very large oil production, reaching an average of 1,56 million barrels per day between January and May 2024, according to the analysis company. Vortex.
A large part of this production is destined for domestic consumption, facilitating the maintenance of low fuel prices.
Fuel subsidy policy
Since Islamic Revolution of 1979, the Iranian government adopted a policy of massive fuel subsidies, aiming to make energy accessible to the entire population and boost economic development.
In 2022, the International Monetary Fund estimated that Iran spent $163 billion on energy subsidies, representing more than 27% of its Gross Domestic Product (GDP), the largest proportion globally.
Comparison with the price of water
An interesting fact is that, in some situations, the price of Deisel in Iran is lower than that of bottled water.
The website iraniantours.com shows that in Iran, a 500 ml bottle of water costs 5.000 Iranian rials (approximately $0,12). Meanwhile, the website pt.globalpetrolprices.com, a reference in the sector, reports that the price per liter of diesel is 3.000 Iranian rials (approximately $0,07).
economic challenges
High subsidies put pressure on the national budget, especially in a context of sanctions International that affect the country's revenues. In addition, low prices encourage overconsumption and waste, contributing to environmental problems and energy shortages.
In November 2024, Iran faced scheduled blackouts due to energy shortages, a paradoxical situation for a country rich in energy resources. The government claims that sanctions have been harming investments in natural gas extraction.
Internal debates on subsidies
The Iranian leadership is aware of the economic implications of fuel subsidies. In August 2024, President Masoud Pezeshkian criticized subsidized prices, calling them “irrational“, especially considering the country’s financial difficulties in purchasing food and medicine.
However, fuel price adjustments are politically sensitive. Previous increases have resulted in protests, such as those in 2019, when demonstrations against fuel price hikes were violently repressed.
International sanctions and rising inflation
Sanctions imposed by the United States and other countries have exacerbated Iran's economic challenges. Iran's annual inflation rate has reached 34,5% in October 2024.
With oil and oil product exports severely restricted, a greater part of Iran's energy production is directed to the domestic market, contributing to the abundance of fuels and, consequently, to extremely low prices.
The restrictions reduced oil exports and government revenues, leading to budget deficits and high inflation.
While fuel subsidies help ease the financial burden on citizens, they also increase pressure on public finances.
The government has avoided economic collapse mainly through oil exports to China, but this dependence is not sustainable in the long term.
Environmental and infrastructure challenges
High consumption of subsidized fuels leads to environmental challenges. Air pollution in major Iranian cities has reached alarming levels, partly due to the heavy use of vehicles powered by cheap fossil fuels.
Furthermore, the country's energy infrastructure suffers from years of underinvestment and sanctions, resulting in frequent blackouts and inefficiencies in power distribution.
Iran's extremely low fuel prices are a complex phenomenon, rooted in subsidy policies designed to make energy affordable.
However, this approach presents significant economic, environmental and social challenges. Comparison with the price of bottled water highlights the magnitude of the subsidies and raises questions about their future viability.
As Iran navigates its economic difficulties, balancing the need to support citizens with fiscal and environmental sustainability will be crucial.
With information from globalpetrolprices and iraniantours.
I had made a very long post. However, I took a while to get back to it, and it was deleted. But I will be brief and objective. Since our country has had commercial ties since the regime of the former Shah of Iran, REZA PAHLAVI, and people are complaining about the price of gasoline, (if you don't know, Poland had a very large debt, like Brazil in the Getulio Vargas era, since they had no money. Well, YSLOT only had internal value, and they paid off their debt by building SHIPS for our Merchant Navy) - the federal government could not even present a proposal to exchange food and medicines for gasoline. Fortunately, we still have the former Transpetro FRONAPE with its ships specialized in clean, light derivatives. But we no longer have the express refrigerated SHIPS, FRIGO SANTOS, TIETE AND TEJO of the extinct LLOYD BRAZILIAN in the FHC GOVERNMENT, which we now miss.
In Brazil, gasoline also costs less than water... a 500ml bottle of mineral water costs 3,50 in any bar, which means that 2 1000ml bottles cost 7,00, while a liter of gasoline is a little over R$6,00 if you go to a shopping mall, airport, convenience stores, stadiums.
football, restaurants, etc. these values increase exponentially, reaching a cost of R$5,00 or R$6,00 for a 500ml bottle. So what? ... is gasoline cheap in Brazil or is water expensive? Now imagine (mentally analyze) the entire process, such as logistics, investments and the cost required for (both) to reach the final consumer...? It's discrepant and difficult to understand and accept, isn't it?