Be Pooya Stone
Gasoline in Iran went up between 50 to 300 percent in price and began to be rationed on 15 November. How does this affect the livelihood of the Iranian people?
Will the rise in gas prices cause inflation and a rise in prices for goods and services? Or, as the government claim, will the rise in gas prices have no effect on the price of the rest of the goods and services.
Gasoline is a very sensitive commodity in all countries of the world because the impacts of gas prices are not limited to household transportation costs and affect a wide range of economic factors, including the production of goods and services. While Iran ranks among the elite in the world in terms of oil and gas resources overall, but the impact is far greater in Iran.
Rising gold and currency prices are the first ominous proportions of the gasoline price hike
The price of gold and currency rose immediately in the early hours of 15 November, when gas prices rose. While unlike food, transportation, and industry, there is no direct relationship between gas prices and the dollar, the dollar rose on the first day of rising gas prices. The dollar reached more than 120,000 rials and the euro reached more than 130,000 rials. The rise in gold and currency has a direct impact on people’s livelihoods.
Impact on passenger and freight transport sector
As gasoline prices rise, demand for it will undoubtedly decline as well, affecting the middle class and those below the poverty line in the Iranian society, which is plagued by rampant inflation, in the middle and lower classes of the society. Using personal cars and motorcycles for travel and courier is a source of auxiliary income. With the rise in gas prices, this sector will certainly face many financial and psychological problems.
On the other hand, the reduction in the quota of gasoline resulting from its rationing will lead to the purchase of gasoline from the free market by the freight sector and will have an immediate impact on passenger and freight fares.
So that just five days after the increase in gasoline prices, the increase in freight fares caused an increase of prices in the central fruit and vegetable market in Tehran so that some fruit and vegetable prices increase by 30 to 50 percent.
To counteract the inflationary effect of rising gas prices in the public transport arena, technology growth must be in line with this policy. Technology growth is meant to increase energy productivity, both in the consumer and manufacturing sectors.
But now, such capabilities are not available to the public; metro and taxis are working to their maximum in the rush hour. There is no option equal to people’s income for using hybrid cars. In other words, it would be an exaggeration to talk about the growth of technology and the growth of energy efficiency in a country with the jurisdiction of such a government that is wasting the wealth of the people in other countries is seen as nothing more than a joke.
Rising prices in the transportation sector have forced government agents to admit to price increase in some cases. The Minister of Industry, Mining and Trade said on 20 November, “The percentage increase in the price of some commodities is inevitable.”
Impact on manufacturing, industry, and agriculture
Many businesses in the industry, agriculture and other sectors are directly dependent on gasoline, so the slightest increase in prices can increase the overall cost of these businesses. For example, rising gas prices are affecting the lubricants and refineries industry and some chemical companies using gas as their consumables. Due to the dependence of the products of these industries on gasoline, as a result of the increase in the price of gasoline, Iran is seeing an increase in the prices of these products.
However, consumption, quotas or subsidies have not been specified for these issues, and the cost of these parts should come directly from free gasoline.
Bursting balloon as prices rise
Government leaders who were convinced of rising inflation caused by rising gas prices have always threatened to “deal with offenders” who increase the prices of goods and their products, but from the first hours of the announcement of new gas prices, evidence shows that the price hike of goods was real, while the government’s threats are unrealistic.
Abdol Nasser Hemati, Iran’s central bank chief, said on 20 November that “increase in gas prices will affect only 4 percent the inflation in a year.”
It should be noted that the annual inflation rate for the Iranian households was in October 2019, 42 percent, according to the Iranian Statistics Center.