23-08-05 It’s the same old story: Iranians are notorious gasoline consumers. Annual gas consumption has already reached alarming levels, compelling the government to set aside a considerable portion of its funds, which should instead go on improving economic infrastructures, for importing fuel.
In former president, Mohammad Khatami's own words, the biggest failure of his government was not being able to direct energy subsidies to needy families. Khatami's opponents never spared a chance to accuse him of falling short of introducing effective ways for promoting energy consumption optimisation.

One of the oft-cited criticisms of the Petroleum Ministry and a factor blamed for unrestrained import of gasoline is shortage of refineries to raise output. Oil Minister Bijan Namdar-Zanganeh has made it clear that one of the Third Five-Year Economic Development Plan (2005-10) objectives was to hand over the task (of building refineries) to the private sector and the state was responsible for making this possible.
"The private sector has to date refused to engage in the process because, in their view, refinery construction lacks economic justification, compelling the ministry to go ahead with building refineries, which would become operational during the fourth plan period, at its own costs."

A recent report by ILNA said the government has announced that more than $ 17 bn would be invested in projects related to refining and distribution of oil by-products. Also, completion of development and optimisation schemes underway in Isfahan and Arak as well as construction of three phases of a liquefied gas refinery by 2009 will make possible converting to gasoline 31.1 % out of every 100 units of crude and gas liquids.
Managing Director of the National Refining and Distribution of Oil Derivatives Company Mohammad Aqaie said recently that expansion and development projects are underway in Kermanshah, Tehran, Tabriz and Lavan refineries. Once completed daily gasoline production in these units would be raised to 122 mm litres by 2010. He said the Oil Ministry has more development plans on its agenda at Bandar Abbas, Abadan, Shiraz and Arak refineries.

Rising consumption
Gasoline consumption growth during 2003-04 reached 11.7 %, more than the figure projected in the Third Plan. A rise in output is unlikely to help ease the situation as long as there is no brake on growing demand. Increasing the average retail price is also an unlikely remedy with the possibility of pushing inflation higher. According to Aqaie, a poor subsidy distribution system and a dilapidated public and private transportation fleet are main reasons behind the unbridled rise in gasoline consumption in this country.
"In the absence of an effective supply and demand management system, the government, the Oil Ministry in particular, had to focus on pumping as much gas as possible into stations by boosting output capacity."

Remarks like this are in response to criticisms that despite a rapid rise in consumption, the Oil Ministry has failed to increase supply in tandem with demand. Aqaie says refinery output has increased by 40 %, which was higher than the state projection of 36 % annual consumption increase though in actual, the increase reached 84 %.
Higher imports is cited, by some, as the ultimate solution to the crisis-prone gasoline consumption trend though this will be at the expense of billions of dollars out of the state coffers, which could instead be used for improving the economy. Imports are tantamount to burning away billions of dollars in a matter of seconds.

The main concern should be how to rid the government of the financial burden of having to spend over $ 4 bn on gasoline imports, and also the fact that between $ 27-30 bn worth of crude is refined domestically, which is guzzled by automobiles literally for free thanks to the subsidies.
What remains to be answered is who is responsible for this huge loss? The people, who for all the known reasons are driving sub-standards cars, which devour gasoline, or the subsidy regime which makes sure the wealthy get the lion's share of the subsidized sector?

State statistics reveal that annual gasoline consumption has averaged an 8 % growth in a period of eight years, from 8 mm litres per day to 60.7 litres. The Oil Ministry says it is responsible for supply not demand management.
In fact, from Aqaie's remarks it can be understood that parliament is directly responsible for devising demand management policies.

Government responsible
Critics continue to hold the government responsible for the impending crisis evident in recurrent summons to the Majlis of the oil minister to face never-satisfied lawmakers. The price of fuel is so closely intertwined with the inflation rate that even rumours of a rise in the latter could send general prices skyrocketing. A rise in transport fares is one of the immediate impacts of higher price of gasoline.
Frequent warnings by the oil minister and his deputies over the possibility of gasoline rationinghave done little to improve the situation. According to Managing Director of National Iranian Oil Distribution Company Kashefi, refineries are operating round-the-clock and the government cannot afford higher imports, necessitating urgent action to cut down consumption.

Aqaie says at present a daily 70 mm litres of gasoline is consumed in Iran out of which close to 30 mm litres is imported.
The ministry some time ago introduced a plan which would allow it to distribute “quota cards” and go along with rationing, as contingency measures in times of crisis. Both plans were deadlocked due to fierce opposition from lawmakers.

Regional rate
The Khatami administration had once spoken of bringing the prices close to the regional rate, saying that despite putting burden on the vulnerable strata for some time, in the longer run it would leave consumers with no choice but to reconsider their consumption habits.
"This seems to be a once and for all solution," the former president had said. If so,the government should think of urgent measures to relieve the low-income strata of financial pressures once gasoline prices are raised to the regional rate. Even his allies in the Sixth Parliament came out against the plan fearing it would agitate a public already burdened by economic hardships.

Ahmad Tavakkoli, MP and one of the most outspoken opponents of Khatami's economic policies, says the state is overcharging the consumers because the actual price of gasoline is 300 rials but offered at 500 rials higher.
Numerous remedial plans have been forwarded to control gas consumption and contain imports. What is lacking seems to be the boldness to implement these plans without fearing the consequences.

Gasoline consumption in Iran is expected to rise to 309 mm litres in the next 18 years from 98 mm litres by the end of the fourth five-year economic development plan (2005-10).
If action is not taken soon, gasoline consumption in Iran will reach 110 mm litres per day within a decade. The crisis though has already set in.