Iran increases gasoline price for its heaviest consumers as economy struggles

TEHRAN, Iran (AP) — Iran early Tuesday introduced a higher price for its heaviest users of gasoline, state media reported, in the latest economic pinch caused by months of war. It’s the second such hike since December.

Such gas price increases can be sensitive and contribute to inflation. An increase in 2019 sparked nationwide protests and a crackdown that reportedly killed over 300 people.

Without specifically mentioning the war with the United States, the government’s announcement cited the “current situation,” adding that the extra money from the price increase will be given to households.

Under the new system, people buying more than their quota of 110 liters (29 gallons) of gasoline a month now must pay 100,000 rials (about 7 cents) per liter, or twice as much as they have been paying since December.

Iran still has some of the world’s lowest gasoline prices, but the price increase adds to daily pressures for many of the country’s more than 90 million people. Already, the currency has been dropping to record lows, and purchasing power has weakened. On Monday, the U.S. dollar was trading at 2.22 million rials.

Keramat Veis Karami, the CEO of the state oil distribution company, on Monday said the new gasoline rate would affect 15% of consumers, the official IRNA news agency reported.

The CEO said consumption reached a record high at 145 million liters (38 million gallons) per day in August, while domestic production capacity was 122 million liters per day. The rest of the supply is imported.

Raising prices can help calm high consumption, which experts have blamed on aging cars and spare parts in Iran as well as insufficient public transportation.

But experts also say increases in gasoline prices will lead to higher inflation in a country that's already struggling with an annual inflation rate of about 67%, according to the country’s statistics center, a government agency.

Cheap gasoline has been viewed for generations as a birthright in Iran, sparking mass demonstrations as far back as 1964, when a price increase forced the shah to put military vehicles on the streets to replace those of striking taxi drivers.