20 December 2010

No sympathy from Rico


William Yong has an article in The New York Times about gas prices rising (and, no, not here):
Gasoline prices nearly quadrupled and riot police guarded filling stations around the capital of Iran as deep cuts in subsidies on fuel and other essential goods took effect. After midnight on Sunday, the price of subsidized gasoline jumped to about $1.44 a gallon from about 38 cents a gallon. Similar increases went into effect for compressed natural gas and diesel fuel, with subsidy reductions for other commodities expected to be phased in gradually.
Security forces with riot shields took positions at gas stations in Tehran, bracing for a possible repeat of the unrest that followed the introduction of gasoline rationing in 2007, but there were no reports of violence.
President Mahmoud Ahmadinejad announced the long-anticipated subsidy reductions in a live television interview on Saturday night, calling the reform “a great victory for Iran”.
Policy makers have described the program as a “rationalization” or “targetization” of Iran’s vast and inefficient subsidies system, but some analysts fear it could increase living costs for millions of middle- and low-income households.
Mr. Ahmadinejad said that the government was spending $114 billion a year on energy subsidies. “If we can save one-quarter of that, it will amount to a vast economic transformation,” he said. He said that the prices of water, electricity, and natural gas would increase “gradually”, and that the subsidy for bread would also be gradually eliminated. He predicted that the bottom sixty percent of income earners would be better off under the new plan, while the wealthier forty percent would “need to economize”.
The reduction in subsidies comes as Iran’s economy is starting to show signs of strain caused by international sanctions. Economic restrictions imposed by the United Nations Security Council and further measures added by Western countries mainly to press Iran on its nuclear program have made it increasingly difficult for the oil-exporting country to conduct international business.
Iranian governments have sought for years to rein in the expensive and unwieldy subsidy system, but have feared a strong public backlash. Price supports amount to $4,000 per family per year, a recent International Monetary Fund report found.
The government tried to cushion the blow by making a one-time payment to each household of about $77. Although the funds were deposited in October, Iranians were not allowed to withdraw the money until Sunday, the day the reductions took effect.
Despite Mr. Ahmadinejad’s call for Iranians to refrain from spending the money immediately to help prevent a sharp jump in inflation, witnesses reported that many customers were withdrawing the full amount at once. “I want to spend it on living costs,” said one bank customer quoted by Iran’s semiofficial Fars news agency. “I know that prices haven’t risen yet, but I know for sure that they will.”
The gasoline price increase was expected to be the most wrenching of the changes because of the country’s heavy reliance on private vehicles. Iran’s long-distance bus and taxi drivers’ guild predicted that fares could increase by as much as 125 percent.
The new price of about $1.44 a gallon applies to the monthly ration of about sixteen gallons per personal car. Gasoline bought over and above the monthly ration will increase to about $2.64 a gallon.
Mr. Ahmadinejad said the government would monitor and control increases in transportation costs that arise from the subsidy cuts. In recent months, his administration has insisted that any price increases above government-ordained limits would be considered part of an “economic conspiracy” and would be dealt with by the police and judiciary.
The political opposition has been skeptical of the plan but seemed to be taking a wait-and-see attitude. “In the dark of night the subsidy targetization plan began, a plan which the government has begun to execute detached from the people, without wisdom or long-term planning,” read an article published on the Kaleme news website, which is associated with the opposition leader Mir Hussein Moussavi.
Rico says their new price (hell, even their over-quota price) is still well below that here; how do we go about buying gas from the Iranians?

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