Unusually high usage of petrol despite decline in the economy
In most countries, energy consumption is an indicator of economic development. That is to say, the higher the energy consumption, the bigger the economic development. Iran, however, is an exception to this general rule. The Iranian government data shows that in recent years an exponential growth in petrol consumption has been underway while the Iranian economy first stagnated and then declined. This unusual trend in petrol consumption, which causes air pollution in cities, means that Iran has less oil for export, without any real indication of economic growth or improvement in people’s livelihood.
To explain this problem in more detail, we can first look at the petrol consumption between 2012-2018 in Figure 1 (the last year that NIORDC has published petrol consumption figures).
Figure 1 shows that petrol consumption in Iran increased by more than 40% from 63,493 litres per day in 1391 to 89,115 litres per day in 2018. If we look at the economic growth in that same period (Figure 2), we can see that per capita GDP in Toomans increased in the same period. So, on the face of it we could think that the increase in petrol consumption is coupled with economic growth and an improvement in people’s livelihood.
However, when we look at the GDP data in US Dollars, we see a different reality. Figure 3 is the GDP per capita in USD (with the USD-Tooman exchange rate based on average annual open market rates), which shows that the per capita GDP in Dollars stagnated between 2012-2018 and then sharply dropped in 2018. This period represents mainly the first 6 years of Rouhani’s presidency.
Considering that many of the costs for people in Iran are in Dollar terms, this analysis confirms that during this period the economic growth was at best stagnant and in 2018 took a nosedive. So why did petrol consumption increase by almost 11% between 2012-2018 while the per capita GDP USD dropped by a massive 45%? One reason for this increase in petrol consumption could be the increase in fuel smuggling to neighbouring countries, which was covered in our previous article. The problem could also be due to the fact that the Iranian government has not invested in automotive technologies that reduce the consumption of the engines. There is a strong possibility that this trend continues beyond 2018 (i.e. increasing petrol consumption whilst the per capita GDP contracts in real terms), which could be a real disaster for the Iranian economy and the environment.
