Iran, one of the largest producers of oil in the world, has shortages of gasoline and has just introduced a rationing scheme causing riots in the streets.
Need I explain why the shortage exists?
Under the rationing plan, owners of private cars can buy 26 gallons of
fuel per month at the subsidized price of 38 cents per gallon.
and this tidbit is interesting.
Conservatives in Iran’s parliament, especially those aligned with
the country’s national oil company, have long pushed for higher
gasoline prices to curtail demand and free up government funds for
investment in more oil and gas production.Ahmadinejad had resisted allowing increases because of his campaign promises to share Iran’s oil wealth with the nation’s poor.
Hey, let’s subsidize healthcare and share it with the nation’s poor!!!
Ahmadinejad would be right in the mix in our presidential debates.
Oops I should add to that analogy the CIA.
The Iranian intelligence services are the most effective in the Middle East, bar the Mossad. Given that they are effectively 2500 years old (with some interruptions) that is perhaps unsurprising– they used to give the Byzantines hell in the 7th century.
It’s quite possible for one faction in Iran to be helping the militias in Iran, whilst the government condemns them.
Well, the problem here is pretty straightforward
and so far unmentioned by anybody: the lack of
refineries. Why they lack refineries is not
entirely clear, but most of the discussion here
has been pretty irrelevant to that.
For that matter, we have a refinery shortage
problem in the US as well, although not nearly
as bad as the one in Iran.
Knowing little about the refinery business I can only imagine that there is little economic rationale for a refinery to produce gas for iranians to purchase at 38 cents a gallon when people in other countries are paying much much more than that.
Probably why so many raw materials come from third world countries, yet the income producing parts of fthe production process happen in the first and second world ones.
While the world market price of crude oil is near $70, isn’t the cost of lifting a barrel of crude oil in Iraq about $2 – $4? The difference largely represents a tax the OPEC countries impose on consumers in the rest of the world. So does it have to be completely irrational for a government of an OPEC country to not impose this tax on its own citizens? Aren’t gas prices in most OPEC countries much lower then in other countries?
As Barkley points out they have a problem similar to the US that they have to import refined product because of a shortage of refineries. In the US we have not built new refineries because the market signaled through the extremely low profitability of existing refineries that we did not need more refineries — after all domestic crude oil output has fallen 40% since the last new US refinery was opened. So why has Iran not constructed more refineries?
spencer
as to specifically why they have not built enough refineries, I expect it has to do with the Soviet-like nature of the economy, and the low price for gasoline. There wasn’t the incentive to make new investments, and they have under-forecast demand.
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