Water water everywhere, nor any drop to drink

Just as Samuel Taylor Coleridge’s thirsty mariner lamented that he had nothing to drink despite being surrounded by water (it was sea water), Iranians in Tehran are rioting over a shortage of gasoline. Iran is sitting on the second largest conventional crude oil reserves in the world, second only to Saudi Arabia, and yet the government has suddenly imposed gasoline rationing. Drivers are being allowed only 100 litres a month, which is not much considering that Tehran is a huge city of 14 million people and public transport is very underdeveloped.

Iran’s gasoline crisis stems from a combination of a lack of supply (refinery capacity is insufficient) and strong demand (a direct result of some extremely generous fuel subsidies – gasoline is sold at around one fifth of its real cost). Rationing fuel is only likely to increase inflationary pressure in Iran, and any additional UN sanctions will serve to make matters worse.

 

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  1. Bond investor says:

    Fox news, of all places, had a fairly compelling explanation for why the subsidy reduction was announced in the dead of night and why the regime would do it now. A guest of theirs said: “The regime is inoculating the population against the pain of a potential gasoline embargo.” So better to test and explore the level of pain and unrest now, than to truly have a Western gasoline embargo strike a devastating blow to the government.

    Posted on: 29/06/07 | 12:00 am

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