Iran will implement a long-planned fuel price increase at midnight on December 13, introducing a new three-tier pricing system after weeks of delay and years of political hesitation.
The plan, first announced in November, raises prices for “high-volume consumers” while leaving most households’ subsidized quotas intact. Motorists who exceed 160 liters (about 42 gallons) of gasoline per month will now pay 50,000 rials per liter, up from 30,000. Eighty percent of households are expected to continue receiving subsidized fuel for most of their monthly needs.
The overhaul removes all quotas for government vehicles, imported cars, luxury and high-consumption models, and newly registered domestic vehicles. Ride-share platforms have agreed not to pass additional costs on to passengers.
The move brings more financial pressure on Iranians, after it was reported that the nation's currency slipped to its lowest level in history on Monday, nearing 1,250,000 rial to the US dollar on the over-the-counter market.
The Iranian rial stood around 55,000 to the US dollar in 2018, when US sanctions were reimposed by the first Trump administration to force Tehran to the negotiating table by limiting its oil exports and access to foreign currency.
Increased fuel prices could send Iran's economy spiraling
Officials are framing the price rise as a long-overdue reform aimed at reducing distorted consumption, easing pressure on state finances, combating fuel smuggling to neighboring countries, and addressing severe air pollution, which authorities say is largely vehicle-related. The proposal had been repeatedly postponed over fears it could trigger unrest similar to the deadly protests sparked by a sudden fuel price hike in 2019, when hundreds of protesters were killed and thousands more arrested.
Government spokesperson Fatemeh Mohajerani told students in the city of Kerman on Monday, "Many of today's problems are the result of incorrect decisions made in previous years,” according to Iranian media.
Responding to a student's question about fuel smuggling in Kerman, Mohajerani said, "This phenomenon is also the result of a series of accumulated issues, and when prices are artificially stabilized, neither the producer nor the consumer benefits, and the field for corruption and smuggling becomes wider.”
Under the revised model, three price levels will now be in effect:
Tier 1 – Subsidized: 60 liters per month at 15,000 rials per liter.
Tier 2 – Semi-subsidized: An additional 100 liters at 30,000 rials per liter.
Tier 3 – Market rate: All further purchases, or any fuel bought via station-issued cards without a personal quota, at 50,000 rials per liter.
Economists warn the increase could ripple through the wider economy, driving up prices of basic goods and adding to already severe inflation and cost-of-living pressures.
The government says the reform is essential to curb rising domestic demand, which has outstripped national production capacity, and to shrink the costly fuel subsidy system. Officials have indicated that gasoline prices will now be reviewed quarterly, potentially leading to further adjustments in the months ahead.