By Dr. Pshtiwan Faraj

Iran is facing an increasingly dangerous economic contradiction: the country is consuming more gasoline than it can produce, yet the government appears increasingly reluctant to raise prices because it remembers what happened the last time it tried.

The abrupt introduction and rapid cancellation of a gasoline pricing measure in Kerman Province has exposed the political sensitivity of Iran’s fuel system. What initially appeared to be a regional administrative experiment quickly became a national political issue, reviving memories of the November 2019 protests, when a sudden increase in fuel prices triggered nationwide unrest and a brutal security crackdown.

The lesson for Tehran is clear: gasoline is not simply an economic commodity. It is a political trigger.

Iran can tolerate shortages, rationing and rising fiscal pressure for only so long. But any attempt to pass the real cost of fuel onto consumers risks transforming an energy-management problem into a legitimacy crisis. The government therefore finds itself trapped between two increasingly difficult choices: preserve an expensive and inefficient subsidy system or reform it and risk provoking another wave of public anger.

The longer Tehran delays the decision, however, the more expensive the eventual solution may become.

The Kerman Test That Wasn't

The controversy began when authorities in Kerman announced that gasoline consumed beyond existing monthly quotas would be sold at approximately 872,000 rials per liter — dramatically above the existing prices. The measure was withdrawn within hours.

The speed of the reversal was politically significant. It suggested that the government was unwilling to absorb even the initial reaction to a possible pricing experiment, particularly at a time when Iranian society is already under severe economic pressure.

Government officials subsequently moved quickly to reassure the public that there was no immediate nationwide gasoline price increase planned.

That reassurance may calm consumers temporarily, but it does not solve the underlying problem.

Iran's gasoline balance is deteriorating.

According to government figures cited in the original report, domestic consumption has reached roughly 135 million liters per day, while production stands at approximately 121 million liters. The resulting deficit has to be covered through imports or strategic reserves.

That gap could become considerably larger.

If consumption continues rising while production capacity remains constrained, Iran could face a structural gasoline shortage rather than a temporary supply problem.

That would force Tehran to make a decision it has repeatedly postponed.

The Ghost of 2019

The greatest obstacle to gasoline reform is not economics.

It is political memory.

In November 2019, the Iranian government unexpectedly increased gasoline prices. The decision triggered demonstrations across the country, followed by a severe security crackdown.

The protests became one of the most serious challenges to the Islamic Republic's authority in years.

The episode left a powerful lesson inside Iran's political establishment: fuel prices can become a catalyst for much broader anger.

Gasoline affects almost every part of daily life. Higher prices raise transportation costs, increase the cost of goods and services and immediately affect households already struggling with inflation and declining purchasing power.

The political consequences therefore extend far beyond the gas station.

For the government, this means that a gasoline price increase cannot be treated as a conventional fiscal reform. It must be evaluated as a potential national-security event.

That is precisely why the Kerman episode was so revealing.

The government appeared to test the waters — and then retreat.

Iran's Fuel Problem Is Structural

Tehran cannot indefinitely solve the problem through administrative caution.

Iran has enormous energy resources, but abundant hydrocarbons do not automatically translate into adequate gasoline supplies.

Refining capacity, investment constraints, aging infrastructure, domestic consumption patterns, fuel subsidies and economic sanctions all contribute to the problem.

Cheap gasoline encourages consumption.

High consumption increases the need for imports and refining capacity.

Imports require foreign currency.

Foreign-currency access is already constrained.

Meanwhile, investment in new production capacity requires billions of dollars that the government does not readily have.

The result is a vicious cycle.

Iran effectively subsidizes a consumption model that it increasingly cannot afford.

The irony is profound: a country possessing some of the world's largest oil and gas reserves is increasingly vulnerable to shortages of refined fuel.

The War Has Made the Problem Worse

The recent conflict has added another layer of pressure.

Damage to energy infrastructure and difficulties transporting or importing fuel can reduce Tehran's ability to compensate for domestic shortages through external supplies.

At the same time, wartime conditions can increase fuel demand from military, transportation and logistical sectors.

This creates a particularly difficult environment for policymakers.

The government must maintain sufficient fuel supplies for the economy and security institutions while also protecting household access to gasoline.

Any disruption could quickly become visible to the public.

Long lines at petrol stations are not merely an inconvenience.

They are political images.

In a country where gasoline shortages have historically carried political consequences, photographs of queues can become symbols of broader economic failure.

The Subsidy System Is Becoming Harder to Defend

The existing subsidy structure is also increasingly controversial.

Under the current arrangement described in the report, private-car owners receive subsidized gasoline through monthly quotas, with additional fuel available at progressively higher prices.

The system is designed to protect consumers from international or market-based fuel costs.

But it also creates inequalities.

Households that own several vehicles can potentially benefit more from fuel subsidies than households that do not own cars.

That creates a paradox in which a subsidy intended to protect ordinary citizens can disproportionately benefit households with greater access to private transportation.

This has encouraged support for an alternative approach: transferring fuel quotas from vehicles to individuals.

Could Gasoline Become a Personal Asset?

The idea of linking gasoline subsidies to individuals rather than vehicles is politically interesting.

Under such a model, citizens would receive gasoline allocations through national identification or banking systems. Those allocations could potentially be used directly or traded.

Supporters argue that this would make the subsidy more equitable.

A person without a car would no longer automatically lose the benefit of the subsidy. Instead, the individual could theoretically sell the allocation to someone who needs more gasoline.

This would fundamentally change the philosophy of Iran's gasoline subsidy system.

Rather than the state determining who receives cheap fuel based on vehicle ownership, citizens would receive a defined energy entitlement.

Economically, the idea could improve distribution.

Politically, however, it is far from risk-free.

A gasoline market based on tradable quotas could produce new forms of inequality and speculation. It could also create confusion during the transition and generate resistance from groups accustomed to the existing system.

Most importantly, the reform would still need to address the fundamental problem: Iran is consuming too much gasoline relative to what it can sustainably produce.

Changing who receives the subsidy does not automatically reduce consumption.

Political Divisions Are Becoming Visible

The Kerman episode also exposed disagreement within Iran's political establishment.

Some officials appear to favor structural reform without directly imposing a dramatic nationwide price increase. Others remain deeply concerned about the social consequences of any fuel-policy change.

That division matters.

Economic reform requires political coordination. If different institutions send contradictory messages, public uncertainty increases and the government can appear indecisive.

The rapid cancellation of the Kerman experiment was therefore more than an administrative reversal.

It was a demonstration of political vulnerability.

The authorities appear to understand that gasoline reform is necessary.

They also understand that the timing could hardly be more dangerous.

Iran's economy is under pressure, households are struggling with declining purchasing power, and the broader regional security environment remains volatile.

In such circumstances, even a technically rational economic reform can become politically explosive.

Gasoline Could Become the Next Protest Trigger

The Iranian government has experienced repeated waves of public unrest over economic and political issues.

The important lesson from 2019 is that protests do not necessarily begin because gasoline prices are the only source of public dissatisfaction.

They begin because gasoline can become the spark.

A population already frustrated by inflation, unemployment, currency depreciation and political restrictions may interpret a sudden fuel-price increase as evidence that the government is shifting yet another burden onto ordinary citizens.

That is why the phrase "gasoline price increase" carries an emotional significance far beyond the actual price of fuel.

It represents the possibility of another economic shock.

And Tehran knows it.

The Government Is Running Out of Easy Options

Iran therefore faces three broad choices.

The first is to maintain the current subsidy structure and continue importing gasoline when necessary.

This is politically safer in the short term but increasingly expensive.

The second is to increase gasoline prices.

Economically, this would provide a powerful incentive to reduce consumption and potentially improve the fiscal position.

Politically, it could be extremely dangerous.

The third is structural reform, such as individual fuel quotas, while gradually changing consumption incentives.

This may be the most politically manageable option, but implementation would be complicated and would not eliminate the need for broader energy-sector reform.

None of these choices is easy.

That is the fundamental problem.

Iran's Energy Security Is Becoming a Political Security Issue

The gasoline dilemma demonstrates a broader transformation in Iran's energy politics.

For decades, the Islamic Republic's vast oil and gas resources were viewed as an economic advantage and a source of strategic power.

Increasingly, the question is whether Iran can efficiently manage the energy resources it already possesses.

An energy-rich country can still experience energy insecurity.

If domestic consumption continues increasing faster than production capacity, Iran will become increasingly dependent on imports even while sitting on enormous hydrocarbon reserves.

That dependence is particularly problematic under sanctions and geopolitical pressure.

Fuel imports require money, logistics and secure trade routes.

All three can become vulnerable during periods of regional confrontation.

The Political Clock Is Ticking

The most important aspect of the Kerman episode may be what it reveals about Tehran's decision-making.

The government is not unaware of the gasoline crisis.

It knows consumption is rising.

It knows production is insufficient.

It knows imports are expensive.

It knows investment requirements are enormous.

And it knows that simply increasing prices could trigger public unrest.

The problem is that every year of delay makes the eventual adjustment more difficult.

If the deficit grows from millions to tens of millions of liters per day, Tehran will have fewer options.

Emergency imports may become more expensive. Strategic reserves may become depleted. Fuel shortages may become more frequent. Rationing may become unavoidable.

At that point, the government could be forced into exactly the kind of abrupt intervention it is currently trying to avoid.

The Real Risk Is a Crisis of Confidence

The most dangerous scenario for Tehran is not necessarily another immediate 2019-style uprising.

It is the gradual erosion of confidence in the government's ability to provide basic economic stability.

Fuel is one of the clearest symbols of that stability.

If citizens can reliably access gasoline at affordable prices, the subsidy system remains largely invisible.

If queues become longer, shortages become more frequent and prices become unpredictable, the problem becomes impossible to ignore.

That is when an economic issue can become a political one.

The Kerman episode should therefore be understood as an early warning.

The government tested a possible solution, encountered immediate political sensitivity and withdrew.

But the underlying mathematics did not change.

Iran is still consuming more gasoline than it produces.

The deficit is still growing.

Investment remains constrained.

And the memory of 2019 remains embedded in the political consciousness of the Islamic Republic.

The Fuel Crisis Could Become Iran's Next Strategic Test

Iran's gasoline dilemma is ultimately a test of state capacity.

Can Tehran reform subsidies without triggering mass unrest?

Can it reduce consumption without imposing unbearable costs on households?

Can it attract the investment necessary to expand refining capacity despite sanctions and economic constraints?

And can it convince the public that reform is necessary rather than simply another burden imposed on ordinary citizens?

Those questions are now becoming more urgent.

The Kerman experiment failed politically, but the problem it was designed to address remains.

That leaves Tehran with a dangerous contradiction: the government may be unable to afford the current gasoline system, but it may also be unable to afford the political consequences of changing it.

The longer that contradiction persists, the more explosive the eventual decision could become.

Iran's next major protest trigger may not begin with a political slogan.

It could begin at a gasoline station.

Dr. Pshtiwan Faraj is a Kurdish political analyst and founder of Kurdish Policy Analysis, an independent platform focusing on Iraq, the Kurdistan Region, Iran, regional security, geopolitics and energy politics.

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