29.12.202112:28 Forex Analysis & Reviews: Iran implements "Fuel for All" plan to increase income

Iran oil minister Javad Owji announced on Monday that each Iranian will be allocated 15 liters of fuel per month at a price of 15,000 rials per liter. People could either use their share of fuel, sell them or receive a total of 225,000 rials (about $ 1).

The move, which is being tested in parts of Iran, allocates citizens 15 liters of subsidized gasoline a month. This plan will significantly reduce the number of subsidized fuel car owners.

Citizens will have to buy the rest at market prices that are at least double the price of the subsidized fuel.

Currently, the average daily gasoline consumption in Iran is about 85 million liters. If each person gets 15 liters of gasoline a month or half a liter a day, the government will have to supply around 41 million liters. The rest must be bought at the market at 220,000 rials.

In other words, the income of the incumbent government will increase six-fold.

People who do not own a car will also receive subsidies for gasoline, officials said.

The daily cost of selling 41 million liters of gasoline to the public would be approximately 615 billion rials, or $ 2 million per day at the free-market dollar exchange rate. Meanwhile, the sale of the remaining 44 million liters of gasoline in the domestic markets or its export at 220,000 rials per liter generates a daily income of 9.68 trillion rials, or more than $ 32 million.

Regime affiliates and front companies of the Revolutionary Guards, or privileged individuals and entities with access to more fuel, will immensely profit from this plan.

It would also increase liquidity and, since Iran's production is very low, it will also boost inflation and lead to a sharp rise in prices.

The new plan will have an impact on other markets and cause a sharp increase in the prices of basic commodities. It is currently being tested on the Qeshm and Kish islands and will then be expanded to other parts of Iran.

This is another scheme for the regime to cover huge budget deficits, so it does everything it can to make a profit. In fact, the regime is setting the stage for higher fuel prices because recently, many experts called price increases an inevitable solution to increase gasoline production capacity.

Back in November 2019, large protests occurred in Iran due to the sudden tripling of fuel prices. That uprising undermined the foundations of the regime.