Friday, June 23, 2006

Iran to halt gasoline imports, impose rationing

Iran will halt gasoline imports from September 23 and start rationing gasoline supplies to motorists because of budget constraints, Iranian Oil Minister Kazem Vaziri-Hamaneh said on Friday.

"Next week will be time to decide when we start rationing. Because there is no budget for importing gasoline in the second half of the year, naturally imports will be stopped and gasoline will be supplied by rationing," he said on state television.

"With 99 percent certainty there is going to be no dual pricing system, just rationing." READ MORE

Despite being OPEC's second biggest producer, Iran relies heavily on gasoline imports. But the budget to March 2007 sliced the amount to be spent on imports to $2.5 billion from $4 billion.

This meant President Mahmoud Ahmadinejad's populist government, which draws its support from the poor, was faced with an unappetising choice of hiking petrol prices or rationing, both potential sources of social discontent.
The Iranian people will not be happy about this. A gallon of gasoline costs $.40 a gallon in Iran today. The price of imported gasoline is much more expense (given the high price of oil) so the regime has had to subsidize the cost heavily. The regime cannot afford to do this and this the rationing. The poor in Iran will not be happy about this development.