Iran Implements Three-Tier Petrol Pricing to Cut Subsidies

The Government of Iran will implement a three-tier petrol pricing system starting December 6, 2025, to reduce the cost of heavy subsidies and curb fuel demand. Under the new cabinet decision, motorists will pay 15,000 rials per liter for the first 60 liters monthly and 30,000 rials for the next 100 liters. Any consumption exceeding 160 liters per month will be charged a third-tier rate of 50,000 rials per liter, representing a 66.6% increase over previous above-quota pricing.

To further reduce subsidies, the government is excluding drivers of imported cars, newly registered vehicles, and state-owned vehicles from the tiered system; these users will pay the maximum rate of 50,000 rials for all fuel. The government intends to review the above-quota price every three months based on refinery pricing. This shift aims to address a deficit where daily demand reaches 140 million liters, surpassing the domestic production of 110 million liters, and to stop the smuggling of an estimated 30 million liters of fuel daily.

President Masoud Pezeshkian previously acknowledged the necessity of price increases but noted the complexity of the intervention given the risk of public unrest. The move follows an economy strained by international sanctions and carries historical tension, as a 2019 fuel price hike triggered deadly nationwide protests.