Cheap, Cheap Gas

I’d known for a long time that Iran, despite its large crude oil resources, was actually close to implementing a rationing scheme for gasoline. Well, now the rationing’s begun and with it the anti-rationing protests. What I hadn’t realized until today was the precise dynamics of the situation. The issue is that gas is preposterously cheap — “After a 25 percent hike in prices imposed May 21, gas sells at the equivalent of 38 cents a gallon.” To make a long story short, the Iranian government is earning money selling crude oil then spending a hefty chunk of that cash purchasing refined gasoline and then selling it back to Iran’s citizens at wildly sub-market prices.

If they were smart, they would just try to decontrol prices gently since rationing when gas is this cheap is just begging for a black market.