Jim_Krane]_Energy_Kingdoms__Oil_and_Political_Sur

IRAN AND DUBAI LEAD THE WAY101

2018). Rising price bands were designed to encourage conservation and
protect the poor.
The price increases halved Iran’s $100 billion subsidy burden and
brought a 10 percent short- run reduction in domestic energy demand.^11
Best of all, a 133,000 b/d drop in oil consumption allowed Iran to increase
its oil exports, albeit temporarily; the increase in exports was soon
blocked by international sanctions and an embargo targeting Iran’s
nuclear program.^12
After the promising start, Iran’s subsidy reform stalled in 2012, beset
by rising inflation and a lack of parliamentary support.^13 Initial plans
called for prices to be increased to 90 percent of international levels
over five years, but that goal was soon forgotten, eclipsed by the con-
frontation over uranium enrichment. The sanctions crisis also made
it difficult to discern the macroeconomic effects of raising energy
prices. The embargo contributed to the inflation that roiled the Iranian
economy, which quickly unwound the subsidy measure. Since energy
prices had not been indexed to inflation or to world prices— a major

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0.70

Gasoline

(quota)

$/ltr

Gasoline

(unrationed)

$/ltr

Diesel

($/ltr)

Natural

gas (res)

$/m3

Natural

gas (power)

$/m3

Electricity

($/kWh)

base

Electricity

($/kWh)

upper

2010

2011

FIGURE 7.1 Before and after comparison of energy prices in Iran, 2010 vs. 2011.

Note: Liquid fuels are given in dollars per liter, or “US$/ltr.”