Report: Iran raises gas prices by 40 percent in subsidy cut

AP News
Posted: May 25, 2015 5:22 AM

TEHRAN, Iran (AP) — Iran will raise gasoline prices by some 40 percent beginning Tuesday, the country's official news agency reported, the latest cut to the Islamic Republic's fuel subsidies that cost it some $32 billion a year.

While previous attempts to raise prices have sparked dissent, last year's increase saw no major unrest.

The report Monday by IRNA, quoting Davood Arabali, a spokesman for Iran's state oil products distribution company, said the new price per liter for subsidized gasoline would be 10,000 rials (34 cents), up from 7,000 rials (24 cents). That's about a $1.28 gallon, compared to the average U.S. price of $2.66 a gallon.

Iranian state television also reported that a current plan allowing for lower subsidized prices on the first 60 liters (15.85 gallons) of gasoline purchased a month by the consumers for each car they own also would end. Diesel fuel prices also will rise to 3,000 rials (9 cents) per liter, up from 2,500 rials (8 cents).

Iran, an OPEC member, consumes 70 million liters (18.49 million gallons) of gasoline daily, with some 10 percent refined and imported from abroad.

Iran began cutting energy and food subsidies in 2010 under then-President Mahmoud Ahmadinejad, part of what he described as a radical "surgery" to help the Islamic Republic's ailing economy as it faced increased international sanction for its contested nuclear program. The second phase, which targeted further gasoline subsidy cuts, was to take effect in March 2012, but was pushed back to 2014 over fears of stoking inflation.

Before the cuts, Iranians had some of the cheapest gasoline in the world. Previous attempts to change the price at the pump have seen dissent. In 2007, protesters rioted and damaged gas stations over prices increasing, with authorities arresting dozens of people.

Iran's low fuel prices has led to rampant smuggling to neighboring countries.