The Inflationary Effects of Fuel Price Increases on Road Transportation

Fuel is one of the most important inputs in road transportation (cargo and passenger) in Iran. Since price policies are being proposed for cutting down very high consumption of fuel in this sector, we try to find out the inflationary effects of these policies in this sector and in the whole economy. In doing this, we use input-output table of 1380 statistical center of Iran, under 3 alternative scenarios: (1) 200% increase in gasoline’s price, (2) 200% increase in gasoil’s price and (3) 200% simultaneous increase in prices of gasoline and gasoil. Our findings indicate that: under 1st scenario, inflation would rise in the cargo and passenger subsectors by 6% and 9% respectively, and in the whole economy (in case of no expected inflation) by 4.3%, under 2nd scenario, inflation would increase in the cargo and passenger subsectors by 4.2% and 4.5% respectively, and in the whole economy (in case of no expected inflation) by 2.2% and, under 3rd scenario, inflation in the cargo and passenger subsectors by 10.2% and 13.5% respectively, and in the whole economy (in case of no expected inflation) would rise by 6.5%.