Calculating Commission Fee for the Distribution of Gasoline and Gas Oil by Private Sector in Iran: A Proposal for Restructuring Iranian Petroleum Products Market

Currently, the distribution of various types of petroleum products is performedexclusively by the government. The high price of land in metropolitan citiesand the lack of incentive for the private sector to invest in the construction offilling stations due to their low-income have caused filling stations not to besufficiently available. One of the solutions to overcoming this obstacle is to usethe ability of the private sector for the distribution of petroleum products. Toreduce the government’s ownership, the market structure for petroleum productsdistribution in the country needs to be changed. This change should be firstlydone gradually and step by step, and, secondly, the government has to monitorthis issue at various stages. In this study, three stages are proposed for the marketrestructuring of the distribution of petroleum products in the country, and theconditions and requirements for each stage are separately identified.For the private fuel distributing companies, the most important problem is theeconomic issue of profitibility. On the other hand, since the product price is stillsubsidized in the country, it is indispensable that the amount of commissionfee should be determined in such a way that the activity of private companiesis economically justified. In this study, the amount of product commissionfee is calculated concerning capital and operatational expenditures using theengineering economics method in different situations by employing COMFARversion 3 software. With regard to the various land prices in different places, theresults of calculations show that the amount of gasoline commission fee variesfrom 6 to 12% of the current price of this product; the commission fee variesbetween 20 and 40% for gas oil.