Iran faces a new energy imbalance, but its options are limited | Energy News
Iran Faces Energy Shortages as Summer Begins
Tehran, Iran – As the summer season approaches, Iran grapples with escalating energy constraints exacerbated by increased air conditioning usage and rising demand. The country’s long-standing practice of keeping utility costs significantly below supply expenses has contributed to an imbalance between energy consumption and production.
Historically, Iranian governments have subsidized energy through a combination of controlled pricing and financial support. However, the ongoing ramifications of conflict with Israel and the United States have significantly restricted the government’s options for addressing the impending energy crisis.
Despite possessing the world’s third-largest proven oil reserves, Iran is again expected to import fuel, as local refinery production cannot meet soaring demand. President Masoud Pezeshkian has urged citizens and businesses to adopt measures to conserve energy, even demonstrating the removal of his jacket during a government meeting to encourage reduced air conditioning use.
Although energy prices for households remain lower than global averages, widespread issues such as corruption, mismanagement, international sanctions, chronic inflation, and currency devaluation have diminished the benefits of subsidized energy.
In November 2019, a tiered gasoline pricing structure was introduced, leading to significant price increases for certain consumers and triggering nationwide protests. Since that time, the government has been cautious about implementing further price hikes.
Inflation continues to rise, yet subsidies have kept fuel prices artificially low. Current attempts to alleviate the burden of these subsidies have resulted in minimal increases in petrol costs through a complex pricing system. Most users of Iranian-made vehicles can access up to 60 liters of subsidized petrol per month at a rate of 15,000 rials (approximately 0.8 cents per liter), with additional allocations available at higher prices.
Recent restrictions limit fuel purchases from “emergency cards” to an additional 30 liters daily at 50,000 rials, approximately 2.9 cents per liter. Due to ongoing supply issues, petrol station staff have reportedly been instructed to restrict these purchases to 10 to 15 liters, complicating access for consumers.
Similar subsidy programs for natural gas, electricity, and water are in place, with authorities hesitant to implement sudden price increases due to potential social unrest. The disparity between rising demand and lagging production capacity has led to persistent queues at petrol stations since the onset of the war.
“Reforming and increasing energy prices is currently not feasible due to the economic climate and societal concerns,” stated Esmail Saghab Esfahani, vice president of the Organization for Energy Optimization and Strategic Management.
Some businesses, particularly small enterprises, report significant increases in their energy bills. A 35-year-old welding workshop owner in Tehran described his monthly electricity costs tripling from 40 million rials ($23) over the past year. “The electricity company just said tariffs have gone up,” he noted, highlighting the broader economic strain.
Authorities claim they will review complaints regarding rising bills. They maintain a system where normal household energy consumption remains low while excessive users face rates up to 45 times the standard price.
Despite possessing the second-largest proven natural gas reserves globally, Iran continues to experience supply shortages during peak consumption periods. The ongoing conflict has further strained energy facilities, with gasoline production capacity decreasing from 115 million liters (30.37 million gallons) per day to 110 million liters (29.06 million gallons). Consumption has surged from 10 million liters in 2025 to 140 million liters this year (36.98 million gallons).
Tensions regarding potential future strikes on Iranian energy facilities further complicate the situation, suggesting that the energy crisis is likely to escalate in the coming months.
