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IEA says Iran loses most money subsidizing fuel of all countries.

The Islamic Republic loses more money subsidizing the Iranian public's consumption of fossil-fuel energy than any other country in the world, according to a new study by the Paris-based International Energy Agency (IEA).

The IEA said Iran sank $45.1 billion last year into keeping such things as gasoline, electricity and natural gas dirt cheap for the Iranian public.

A big problem with such subsidies is that cheap energy causes the public to use energy wastefully. As a result, society loses even more money because it must subsidize waste and inefficient energy use by people and by businesses. What's more, cheap gasoline encourages smugglers to sneak Iranian gasoline into neighboring countries where the price is often 10 times that in Iran, meaning the Iranian state is actually subsidizing the gasoline used by Pakistanis, Turks and others.

The IEA said Iran's subsidies gobble up 10.4 percent of the country's gross domestic product (GDP), further weakening the national economy.

Iran's fossil-fuel subsidies also total 15 percent of all such subsidies around the world, the IEA said.

Iran devotes more of its wealth to energy subsidies than any other country, and only two other countries come even close to Iran. Iran sinks $45.1 billion into such subsidies, China sinks $38.3 billion into them and Saudi Arabia sinks $37.2 billion. But the next country on the chart is Russia, which devotes $22.0 billion or less than half what Iran devotes to such subsidies.

As a percentage of GNP lost on subsidies, Iran ranks fourth in the world. Libya devotes 13.7 percent of its GNP to such subsidies, Turkmenistan devotes 11.2 percent and Uzbekistan 10.9 percent, all above Iran's 10.4 percent. Egypt and Venezuela are next with about 8 percent sunk on subsidies.

The IEA calculates the subsidies by comparing the prices paid by customers in each country with the full cost of supply of the fuel. For countries like Iran that export fossil fuels, the IEA considers the "opportunity cost" of the fuel. In other words, the cost of the subsidy in Iran is based on how much Iran could earn from the crude if it sold it on the international market.

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Title Annotation:Economy: Money and its impact
Publication:Iran Times International (Washington, DC)
Geographic Code:7IRAN
Date:Nov 23, 2018
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