Gas Rationing Raises Iranian Ire

Iranians line up to pump gasoline at a petrol station in downtown Tehran, June 26, 2007.
Two gas stations were torched early Wednesday in Tehran as angry Iranians protested fuel rationing measures suddenly enforced by the government, while many other Iranians lined up to fill their tanks.

There was no official confirmation Wednesday linking the two gas stations that could be seen burning in Tehran to the protests against the rationing, announced late Tuesday by the Oil Ministry. The measure sparked long lines at stations as Iranians tried to get one last fill-up before the limitations kicked in.

State radio reported early Wednesday that several stations were attacked "by vandals," without giving further details. State-run television also said some of the vandals were detained. It did not give number of the detained people.

Reports that gas stations in several cities across the country were also in flames could not be independently confirmed.

People were still forming lines at gas stations on Wednesday, though lines had shortened compared to the previous evening.

Iran has plenty of oil — it is the world's fourth largest producer — but it has only enough refineries to make 60 percent of the gasoline it needs, reports CBS News correspondent Elizabeth Palmer.

To supply the rest, it is forced to export crude oil by tanker to other Persian Gulf countries, have it refined there, then re-import it, at a huge extra cost.

At the moment, Iranian drivers pay 38 cents per gallon at the pumps, thanks to heavy government subsidies, reports Palmer The average cost to produce that gallon is $1.15 — which means the Iranian state is paying a 77-cent subsidy to consumers for every gallon sold.

That adds up to $16 billion every year that Iran, with its economy already battered by United Nations-imposed sanctions, can ill afford.

"I could not fill my car last night because of the rush. Now I have come to experience my first quota," said Hassan Riahi, a 21-year-old engineering student, expressing common anger as he waited at a Tehran gas station guarded by four police officers.

The government had been planning for weeks to implement rationing, which was supposed to begin May 21 but was repeatedly put off. In May, the government reduced subsidies for gas, causing a 25 percent jump in the price.

The issue is hugely sensitive in this oil-rich nation, where people are used to having cheap and plentiful gas. Hard-line President Mahmoud Ahmadinejad came to power in 2005 election based largely on his promises to improve the faltering economy. But his failure to do so has sparked widespread criticism.

"This man, Ahmadinejad, has damaged all things. The timing of the rationing is just one case," said Reza Khorrami, a 27-year-old teacher who was among those lining up at one Tehran gas station before midnight on Tuesday.

Some stations in Tehran had lines more than a half mile long. Minutes before midnight, car owners still caught in the long lines began blaring their horns over and over in protest — sparking arguments with nearby residents trying to sleep.

"Is this good timing, to announce rationing only three hours before it starts?" complained Ahmad Safai, a 30-year-old shopkeeper who was in line. "I had no gas in my car's tank when I heard the report."

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. Taxis can get 211 gallons a month at the subsidized price.

Professor Sadegh Zibakalam, a respected political scientist from Teheran University, tells CBS News, "the subsidy that the government pays for gasoline is nearly 20 times what it's spending on health. It's obvious that this is crazy, but any government who ends this subsidy — which has been with us since the time of the shah — would become immensely unpopular... So no one wants to do it."

Palmer reports the rationing is bound to hurt many thousands of Iranians who have to supplement their salaries as teachers, or even doctors, by moonlighting at second jobs — such as driving taxis or delivery vans — just to make ends meet.

Conservatives in Iran's parliament, especially those aligned with the country's national oil company, have long pushed for higher gasoline prices with the hope of curtailing demand and freeing up government spending to invest in more oil and gas production.

Still, Ahmadinejad had resisted allowing increases because of his campaign promises to share Iran's oil wealth with the nation's poor. Iran has a law that says gasoline prices must increase 10 percent every year, but the president has resisted efforts by parliament to reverse a 2005 decision to suspend the annual increases.

By 2014, Iran wants to raise its oil production capacity to 5.3 million barrels a day, from the current 4.3 million barrels, and natural gas from 560 million cubic meters a day to 1.5 billion cubic meters, Iranian Minister of Petroleum Kazem Vaziri Hamaneh said recently.

"Iran would need $93 billion in foreign investment and more than $43 billion in domestic financial resources by 2014. The country cannot meet that level of investment and technology needs on its own," he said at an oil-and-gas conference earlier this month in Malaysia.

In addition, Iran needs another $12 billion investment to raise its refining capacity from 1.625 million barrels a day to 2.94 million barrels in the next 5 years, he said.

  • Tucker Reals

    Tucker Reals is the foreign editor, based at the CBS News London bureau.