Government Subsidies and Demand for Petroleum Products in Iran

Oil-exporting countries are among the world’s fastest growing consuiners of petroleum products.  Between 1966 and 1986, encouraged by rising incoines and falling piices, doinestic consumption of oil in OPEC countries increased by 94 per cent per year. Without fui-ther increase in capacity, at this rate their consumption of refined products – which in 1993 stood at 15 per cent of oil production capacity – could exceed 50 per cent in fifteen years, thus displacing the rest of the world as the main consuiner of OPEC oil. In some countries – for example, Iran, Indonesia and Nigeiia – doinestic consumption has already reached one-third of production, and unless checked it inay outgrow planned expansion in capacity. Serious difficulties in financing the building of new capacity have prompted m y co untries to try to restrain doinestic consuinption in order to free more crude oil for exports. Increased awareness of environmental costs arising froin inefficient use of oil products has also strengthened conservationist policies in oil-exporting countiies.

By: D. Salehi-Isfahani

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