Iran on the Brink of Collapse... What's Really Happening?

Mohammad Reza Aref, First Vice President of Iran, warned that rising prices have reached a "disturbing" level, urging state agencies to prepare for the "worst scenarios," as pressures mount on the gasoline market and fears grow that fuel costs and inflation could become sources of social unrest.

Aref said during his chairing of the last meeting held by the Market Regulation Committee that the United States is active on both economic and social fronts and, in his words, seeks to incite discontent and push the country toward a "social collapse." Controlling inflation, preserving purchasing power, achieving relative market stability, and combating price gouging and monopolies were listed among the government's priorities.

The government of President Masoud Pezeshkian is studying three new scenarios for gasoline, one of which allows stopping supply after daily production is exhausted, while allocating remaining quotas to individuals.

Government spokesperson Fatemeh Mokhberani confirmed that none of the options had been finalized. She stated that the decision would be announced through media channels once the government completes gathering opinions and reaches a final formulation.

Pezeshkian said last week that the U.S. maritime blockade has closed off routes for goods entering Iran, and that the government lacks the resources necessary to import gasoline.

On April 13, Iranian Parliament Speaker Mohammad Bagher Ghalibaf addressed Americans, warning of the consequences of closing the Strait of Hormuz on fuel prices, shared a photo of gasoline prices at stations near the White House, and wrote: "Enjoy the current prices," adding that Americans "will soon miss gasoline priced at four or five dollars."

Three Options

Estimates of the shortfall vary among officials and time periods, ranging from about 7 million to 20 million liters per day, while Esmail Saghapour Asfahani, Deputy President and head of the Organization for Improving Consumption and Strategic Energy Management, estimated the current shortage between 14 and 15 million liters.

War has made closing the gap more difficult, as production capabilities have been damaged and gasoline imports have ceased due to the maritime blockade.

The government is examining three options: limiting daily supply to production levels and halting distribution after stock depletion, distributing production between vehicles and selling excess consumption at free market prices, or transferring quotas directly to individuals equivalent to approximately 30 liters per person monthly.

The gap becomes harder to fill with imports halted. Sbahand noted that the maritime blockade has led to a halt in gasoline imports, warning that any system increasing reliance on imported fuel would raise state costs and debt.

Hamid Hoseini, spokesperson for the Union of Oil, Gas, and Petrochemical Product Exporters, said on July 26 that imports have become "almost impossible," estimating the shortfall at around 20 million liters per day, with refineries operating at maximum capacity of nearly 110 million liters and consumption reaching about 130 million.

Estimates of the gap vary. Sbahand cited a sector official from refining and distribution before the Energy Committee stating that production reached about 130 million liters daily against consumption of 137 million, while Asfahani places available production at 121 million and consumption at 135 million.

Fatemeh Mokhberani had previously stated on July 28 that gasoline production capacity suffered significant damage during the war, and that importing fuel requires special allocation of foreign currency resources. She added that attacks have deprived the country of 230 million cubic meters of gas production capacity.

Nasrollah Seifi, former head of the Fuel Consumption Improvement Organization, pointed out that attacks on Asaluyeh, declining production of gas condensates, reduced refinery feedstock, and restrictions on imports via the Caspian Sea have increased the complexity of securing gasoline.

A pilot plan in Kerman Province reignited debate over gasoline pricing after it included selling excess consumption at high prices before being suspended.

Sbahand said a pilot plan discussed in the Energy Committee, attended by the oil minister and ministry officials, included 60 liters monthly at 1,500 tomans, 50 liters at 3,000 tomans, and an additional 40 liters at 5,000 tomans, totaling 150 liters monthly.

Consumption exceeding 150 liters would have been sold at a price linked to the Gulf FOB rate. The local advertisement showed a price of 87,200 tomans per liter—equivalent to about 47 U.S. cents—based on the Iranian market dollar exchange rate of 187,200 tomans per dollar on Monday.

204 stations in the province were preparing to implement the plan. Ahmad Salari Far, manager of Kerman’s Petroleum Products Distribution Company, announced the suspension of the plan following consultations between the governor and central government officials, citing the need for further study of the consumption management and smuggling prevention program.

Fears of Protests

Concern over gasoline has moved beyond production and subsidy calculations to fears of how sharp price increases might affect the streets, as the government acknowledges inflation and rising prices are eroding purchasing power.

Ahmad Moradi, member of the Energy Committee, said people's ability to bear further inflation is limited, and raising gasoline prices could trigger a new wave of price hikes. He rejected comparing Iranian fuel prices to those in other countries without accounting for income levels, vehicle quality, and public transportation standards.

Ramzan Ali Sangdowini, committee member, said MPs urged the government not to use price increases as a tool to reduce consumption. Kamran Ghaznafar, member of the Internal Affairs and Councils Committee, went further, warning that a sudden jump could send the country back to the November 2019 protests.

A sudden increase in gasoline prices in November 2019 sparked widespread protests in Tehran and dozens of cities, quickly escalating into a political and security crisis marked by near-total internet shutdowns and widespread crackdowns.

Warnings coincided with scattered living-cost protests; in recent days, videos circulated showing gatherings of retirees in multiple cities demanding improved conditions, while Aref acknowledged in the same meeting that the inflation wave had become "disturbing."

Existing Tightening

The government did not wait for the final decision on the three scenarios to begin adjusting rationing systems. Fatemeh Mokhberani said the gasoline ration priced at 3,000 tomans was reduced from 100 liters to 70 liters during the war, then to 50 liters, while the base ration remained at 60 liters priced at 1,500 tomans.

Last week, Mokhberani said the cost of transporting one liter of gasoline from production to stations alone ranges between 3,000 and 4,000 tomans, while part of it is sold to consumers at 1,500 tomans.

Asfahani believes the efficiency of domestic vehicles is a key factor in the crisis, stating Iran would not face the current imbalance if its vehicles consumed fuel similarly to modern cars.

Projections suggest that if the current trend continues, the shortfall could exceed 30 million liters daily by 2029, with consumption approaching 162 million liters and production around 129 million, assuming war-related damages are compensated.