Iran Faces Fuel Shortages and Deficits Amid US Sanctions and Regional Conflict

Iran is facing mounting fuel shortages as United States pressure restricts its access to vital imports, stretching supplies of a commodity that has historically triggered significant public unrest in the country. The state-run Hamshahri newspaper reported long queues at petrol stations in Tehran as drivers rush to fill their tanks ahead of anticipated price changes.

Esmaeil Saqab Esfahani, head of the Energy Optimization and Strategic Management Organization, stated that the domestic gasoline market is dealing with a daily deficit of 14 to 15 million liters. This shortfall is attributed to record consumption levels, damage incurred during the ongoing conflict, and shifts in national budget priorities. Esfahani emphasized the need to reduce consumption to align with domestic production capabilities.

The fuel supply challenges coincide with heightened economic pressure from the United States. US Treasury Secretary Scott Bessent described the measures as a major financial offensive against the country. Meanwhile, a blockade on Iranian ports has prevented the imports that Iran typically relies on to bridge supply gaps, while Israeli and US strikes on energy facilities have further impacted infrastructure.

President Masoud Pezeshkian previously urged the public to utilize public transport and raised the possibility of rationing. Additionally, Iran's parliament speaker Mohammad Bagher Ghalibaf noted concerns that external actors might exploit rising gasoline prices during the conflict. To mitigate the shortage, the government has encouraged drivers of dual-fuel vehicles to utilize compressed natural gas, and the Persian Gulf Star Refinery has reportedly used methanol to increase gasoline output.

Authorities are currently evaluating three potential strategies to manage the shortage. These options include capping daily fuel distribution to 121 million liters before shutting off pumps, continuing sales past that threshold at a higher price, or allocating quotas directly to individuals instead of vehicles. Iran currently employs a tiered quota system providing monthly allowances of discounted gasoline, with prices ranging from 15,000 rials per liter for the first 60 liters to higher rates for additional consumption.

Efforts to test pricing adjustments have faced setbacks. The government recently discontinued a pilot program in Kerman that proposed a significantly higher rate for purchases exceeding an increased quota, after the initiative sparked public concern over potential nationwide price hikes amid rampant inflation and currency depreciation.

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