Iran’s government signals fuel price hike on eve of new US sanctions

Tehran, Iran – The Iranian authorities is preparing the nationalist for different summation successful substance prices arsenic it attempts to buoy the country’s ailing economy.

With the United States’ siege of Iran’s seaports and the economical interaction of the warfare continuing, the connection of heavy subsidised substance to the country’s 93 cardinal colonisation is simply a load that the authorities is struggling to afford.

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The International Monetary Fund predicts that Iran’s gross home merchandise (GDP) volition declaration by 5.4 percent successful 2026.

Hiking the terms of petrol successful this oil-rich state has already sparked unrest before, including nationwide demonstrations successful 2019. Such measures besides preceded the January 2026 protests by respective weeks.

So authorities are treading carefully, with a last determination expected implicit the coming weeks.

“I recognize that we person galore problems successful nine now. We are doing our champion truthful the radical are not afflicted, but the force is doing its implicit champion truthful we won’t succeed,” President Masoud Pezeshkian said during a code connected Sunday morning, alluding to the six-month US-Israel warfare connected Iran.

After US President Donald Trump threatened to people Iran with the “most crushing economical operation” ever undertaken against immoderate country, the Iranian rial deed a caller all-time debased of 2 cardinal rials per the US dollar successful Tehran’s unfastened marketplace connected Sunday afternoon.

On Friday, Pezeshkian noted that the terms of substance successful Iran is considerably little than successful astir countries successful the world.

He said his medication pays 1.3 cardinal rials (65 US cents astatine the existent rate) per litre of petrol produced by refineries. The lowest terms tier offered to the colonisation is 15,000 rials (less than 1 cent) per litre (0.26 gallons).

Two different terms categories for idiosyncratic conveyance usage – 1 astatine 30,000 rials (1.5 cents) per litre and the 3rd astatine 50,000 rials (2.5 cents) – are besides eating into the government’s finances.

Meanwhile, Iranians with imported, free-zone oregon recently registered vehicles are liable for the highest-price tier.

Still, determination are limits to the magnitude of subsidised substance Iranians tin purchase, with each class having its ain monthly quota, and income are lone allowed with a substance card.

Pump stations person their ain cards that connection immoderate other substance astatine the highest-price category, but with a single-use bounds of 25 litres successful Tehran.

The quota for the cheapest class is 60 litres. From the commencement of the existent calendar twelvemonth successful precocious March, authorities chopped the quota for the 2nd class from 100 to 70 litres. After two weeks of warring betwixt Iran and the US erupted again successful July implicit the Strait of Hormuz, this allowance was chopped again to 50 litres.

Iranians present devour astir 135 cardinal litres per time of fuel, with authorities saying earlier this period that accumulation was astatine astir 121 cardinal litres per day.

A show shows currency speech accusation successful the Grand Bazaar successful Tehran, Iran, August 17, 2026 [Majid Asgaripour/West Asia News Agency via Reuters]

To compensate for these fiscal losses, the authorities has attempted to summation refinery production, utilized petrochemical products, and reduced the prime of substance by diluting it. Fuel imports person besides stopped owed to the war.

Three undesirable options

The government’s caput of vigor optimisation, Esmail Saghab-Esfahani, told authorities tv past week that determination are 3 options – each with their ain complexities.

One option, helium explained, is simply a first-come, first-served mechanics whereby prices would stay unchanged, but pump stations would simply unopen down aft moving retired of their allocated petrol.

Another is to connection each Iranians – including those without a conveyance – astir 30 litres of substance per period astatine the lowest terms tier. Those who don’t thrust could merchantability their monthly quota if they choose.

The 3rd enactment is to liberalise the terms of substance for all, with the authorities reportedly considering a terms of 872,000 rials (about 44 cents) per litre. But the effect of this would beryllium to make another immense inflationary bubble, with the monolithic summation successful transport and logistics costs for businesses being passed connected to consumers.

This terms is person to the refinery accumulation terms tag, and was astir implemented successful a aviator programme successful Kerman, the country’s largest province, successful southeastern Iran.

Local authorities, reportedly successful conjunction with the government, announced the caller prices would beryllium enforced successful 204 pump stations crossed the state overnight into August 13. But the authorities cancelled the aviator strategy astatine the past minute, and contradicted section officials by saying they were not consulted connected the move.

Nevertheless, the authorities has signalled that a sizeable terms summation is successful the works.

On Friday, First Vice President Mohammad-Reza Aref said that the cheapest terms tier with the 60-litre quota indispensable stay successful place. But the 2nd quota could gradually fall, and prices should yet beryllium liberalised transparently with proceeds directed toward susceptible people.

“The authorities keeps talking astir however substance prices don’t lucifer different countries, but it doesn’t similar to speech astir however salaries don’t adjacent statesman to lucifer different places, oregon different expenses,” Mostafa, who earns 300 cardinal rials ($150) a period moving astatine a covering store successful occidental Tehran, told Al Jazeera.

He explained that portion the outgo of driving to enactment successful his 15-year-old Iranian-made conveyance does not origin heavy successful his monthly calculations, housing, nutrient and different runaway expenses are a large situation aft months of war, blockade and intensified US sanctions, arsenic good arsenic home mismanagement and state-imposed net shutdowns.

Figures released by the Statistical Center of Iran successful July reported that prices were 88 percent higher compared to the aforesaid period past year, with food inflation lasting astatine implicit 128 percent.

A 55-year-old antheral moving arsenic a operator for aggregate online ride-hailing services told Al Jazeera that conversations with passengers often crook into expressions of choler and vexation astir the deteriorating surviving conditions successful Iran.

“Everything volition get much costly a small portion aft substance gets much expensive,” helium said. “We’re already getting crushed by the prices we person today.”