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Report: Iran to cut portion of gasoline subsidies

April 24, 2014

TEHRAN, Iran (AP) — Iran will cut a portion of its gasoline subsidies beginning Friday, nearly doubling some prices at the pump as part of a second round of cuts delayed since 2012, state television reported Thursday.

Under the new pricing scheme, state television said each car on the road would see its monthly, 60-liter (15.85-gallon) reduced-cost allowance jump to 7,000 rials (22 cents) per liter from 4,000 rials (12 cents). That works out to about 83 cents a gallon under the new pricing structure, compared to 45 cents under the former. It said every liter after that will cost 10,000 rials (31 cents), up from 7,000 rials. That’s a rise of $1.17 a gallon from 83 cents a gallon.

Iranian media has been reporting for days that a subsidy cut was coming, but authorities only announced the decision in a late-night broadcast. The subsidies keep the cost of gasoline artificially low for consumers in Iran, an OPEC member.

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 over fears of stoking inflation.

Before the cuts, Iranians had some of the cheapest gasoline in the world — and it’s still cheap, compared to a U.S. average price per gallon for regular at $3.68. But 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 consumes some 70 million liters (18.49 million gallons) of gasoline per day. Iran’s refineries are unable to produce enough gasoline for its domestic production, so it must import supply from refineries abroad.

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