“The price of gasoline in Iran rose four-fold on Sunday while a heavy police presence ensured there was no repeat of rioting seen the last time the government restricted access to heavily subsidized fuel. Motorists had been expecting the rise for the past three months as part of President Mahmoud Ahmadinejad's policy to phase out subsidies on essentials such as energy, food and water, so the midnight price hike was accepted with grim resignation.
Up until Sunday, subsidies had allowed Iranians -- who see cheap fuel in the oil-rich country as a birthright -- to pay just 1,000 rials (about US10¢) per litre for the first 60 litres they buy per month.”
The long economic boycott of Iran may be starting to bite. The regime must be in dire financial circumstances because about the last thing tyrannies surrender is subsidized gasoline prices.
Due primarily to China’s rise, it is now widely held that authoritarian states can successfully host world-class capitalist economies. Certainly, for a long time, many such states have allowed the few to make extraordinary profits. However, the gasoline market still demonstrates a strong positive correlation between stable democratic governments and free market pricing.
This is important if emerging economies are to generating wider prosperity through the most efficient allocation of resources. Of course, governments that are unsure of their legitimacy are also less likely to stop subsidizing the wasteful use of polluting sources of energy.
In Western democracies, citizens shoulder adult political responsibilities and, as consumers, their governments generally feel they can treat them as adults as well. If they can afford it, tyrannies prefer to treat their subjects like children. For instance, the governments of Iran and Saudi Arabia, which are financed almost entirely by export revenues from depleting oil reserves, have for decades asked their consumers to pay as little as 25 % of the market price of fossil fuels.
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