Iran to Cut Gas Subsidy

Governments around the world love to give goodies to their population. It accomplishes several goals in shot, it makes people happy with the gov, dependent on the gov, and less likely to cause trouble. Of course this often leads to a Frankenstein monster when that very government needs to cut back on the goodies. In a move which could lead to their overthrow, the mullahs in Iran are looking at cutting back on gasoline subsidies. There is nothing new about this idea in Iran, but to try it now with so much pressure inside and outside could have catastrophic results for the Iranian government.

BEIRUT, Lebanon — The outside world may be focused on Iran’s intensifying confrontation with the West over its nuclear program. But at home, Iranians are more concerned with an ambitious and risky new effort to overhaul the country’s troubled economy.

If it goes awry, the plan to phase out Iran’s system of state subsidies, which has existed for decades, could profoundly destabilize the government of Mahmoud Ahmadinejad, who has aggressively championed change. But it could also help wean Iran from its dependence on foreign gasoline and insulate the economy from new sanctions — which are a strong possibility if Iran continues to defy Western pressure over its nuclear program.

The new plan has been the subject of frenzied debate in shops, blogs and homes across Iran, not to mention the Parliament. Lawmakers across the political spectrum have warned of catastrophic price shocks once subsidies are lifted. Conservatives seem deeply worried about the repercussions, with some saying the plan could lead to a crime wave, or worse. Opposition leaders like Mir Hussein Moussavi have begun hinting that the government’s failure to stem economic pain could become their new rallying cry.

Of course how successful they will be in the face of an opposition still smarting from the massacres over the election is open to question. Of course Iran incredibly dependent on gasoline imports:

Gasoline:
Iran is the second biggest gasoline importer in the world after the United States, consuming over 400,000 bbl/d. According to FACTS Global Energy, Iran imported over 192,000 bbl/d of gasoline in 2006 costing $5 billion. The gasoline consumption growth rate has averaged ten percent annually over the past six years, and the cost of imports is expected to reach $6 billion in 2007, up from $2.8 billion in 2005. Gasoline prices are heavily subsidized, and sold below the market price at around 42 cents per gallon, which has encouraged increased consumption. An increase in vehicle sales in recent years has also contributed to the problem. According to PFC Energy, car ownership in Iran grew 250 percent between 1990 and 2006, and a majority of these vehicles are older models. Gasoline powered vehicles in Iran are expected to reach 14.9 million by the end of 2007. Iran does not have sufficient refining capacity to meets its domestic gasoline and other light fuel needs.