State-owned energy in Iran is so cheap, it’s actually a problem

Under state ownership, Iranians pay so little for oil consumption it’s actually a problem. This is somewhat amusing given it shows that nationalisation can dramatically reduce people’s energy bills. Just in Iran’s situation, the price is too low, meaning the government should take more profit and invest it in industries such as education and healthcare.

As a disclaimer for those jumping the gun, this article focuses on only this aspect of Iranian policy, it’s not upholding the overall system of an authoritarian theocracy.

Why is energy so cheap in Iran?

State ownership combined with government subsidies means Iranians pay as little as £0.021 per litre of fuel. The average global price is £1.09, demonstrating how remarkably inexpensive Iranian oil is.

Of course, the cheap oil is also partly because Iran has the third largest reserves in the world.

The issue is that such cheap energy leads to overconsumption. It’s why even under public ownership, finite resources should not be free or too cheap.

Iran’s energy intensity index is one of the highest globally. Plus, 20% of Iran’s daily consumption is made up of oil smuggled abroad and sold to other countries because of the low price at home.

Low cost energy means reduced expenditure for agriculture, delivery and for businesses and people. It’s generally a good thing. But rather than making it too low, profit can be used for public investment in other areas.

Before privatisation, nationalised energy in the UK made significant profit for the public purse, meaning the government can spend more with less risk of inflation.

Green energy over oil

That said, it’s clear that renewable energy is not only cheaper to produce but addresses the climate crisis. We need to move away from oil, no matter what the corporate and state luddites say.

In 2025, Earth Overshoot Day landed on 25 July. That’s the day when, globally, we use the amount of resources that the planet can replenish for the next year — our ecological budget.

This is largely due to consumption of fossil fuels. If we changed to 100% renewables globally, which is entirely possible, it would bring the date back six months.

But Iran does show how much state (or common) ownership can reduce prices for individuals in a society. Amusingly, it’s actually too cheap.

Featured image via the Canary

By James Wright

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