Dynamics of Gasoline Price Changes; The Effects of Pricing Policies in Iran

Abstract

Abstract The government as the determinant of gasoline prices in Iran has always faced challenges because of economical, social, cultural and environmental effect of gasoline price changes. In recent years, different implemented pricing policies have had varied consequences and, in some cases, have not necessarily achieved the purposes that the policy makers sought. Since the dynamics of the gasoline pricing system in IRAN's economy resulted in undesirable outcomes, this article aims to understand the structure governing gasoline pricing, price change policies, and their effects to compare different policies related to this subject and provide practical suggestions for gasoline pricing in IRAN. The system dynamics approach is used to illustrate the structure governing the price of gasoline and identification and simulation of different policies' effects on model behavior. The simulation results showed that if the politician's goal is to decrease the prices, the best policy is inflation-based pricing and price consolidation, although the gasoline demand (consumption and smuggling) is maximum. But if the goal is to decrease consumption, the ideal policy is pricing based on regional prices or supply and demand with gradual change.