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

Document Type: Original Article

Authors

1 Professor, Economics Department, University of Tabriz, Tabriz, Iran

2 Assistant Professor, Economics Department, University of Tabriz, Tabriz, Iran

3 Associate Professor Economics Department, University of Tabriz, Tabriz, Iran

4 Associate Professor, Institute for International Energy Studies, Tehran, Iran

5 Faculty of Economics and Management, University of Tabriz

Abstract

Currently, distribution of various types of petroleum products is performed exclusively by the government. The high price of land in metropolitan cities, lack of incentive for the private sector to invest in construction of filling station due to the low-income, have caused filling stations to be insufficiently available. One of the solutions to overcome this obstacle is to use the ability of the private sector for distribution of petroleum products. To reduce the government's ownership, the market structure for petroleum products distribution in the country needs to be changed. This change should be firstly done gradually and step by step, and secondly, the government has to monitor this issue at various stages. In this study, three stages are proposed for the market restructuring of the petroleum products distribution in the country, and the conditions and requirements for each stage are separately identified.
For the private fuel distributing companies, the most important problem is the economic issue and having profit. On the other hand, since the product price is still subsidized in the country, therefore, it is indispensable that the amount of commission fee should be determined in such a way that the activity for private companies is economically justified.
In this study, the amount of products commision fee is calculated concerning capital and operatational expenditures, using the engineering economics method in different situations by COMFAR version 3 software.

Keywords