As Iran faces a serious energy crisis, Israel's potential retaliation could reportedly target oil refineries or export terminals, turning the country's struggling energy sector into a prolonged disaster.
This summer, Iran faced a 20,000-megawatt electricity deficit, equivalent to 25% of the country's electricity demand. Unlike previous years, Iran experienced a gas shortage alongside the electricity deficit. As a result, the consumption of fuel oil (mazut) in Iran's power plants doubled, and diesel consumption increased by 80%.
Altogether, these two polluting fuels accounted for 15% of the power plants' fuel supply. With the onset of autumn, this share has risen to 25%, and in winter, it's expected that half of the fuel used in power plants will be fuel oil and diesel, requiring the consumption of 150 million liters of liquid fuel per day in this sector.
Meanwhile, data from the Ministry of Oil shows that the country's reserves of diesel and fuel oil amount to only 1.5 billion liters. Even if no diesel or fuel oil is provided to industries or land and sea transportation, this quantity would only suffice for 10 days' worth of electricity production.
In recent years, Iran has faced a growing gasoline crisis, with average daily consumption reaching 124 million liters (nearly 33 million gallons). This winter, a severe natural gas shortage is expected to halt the supply of 20 million cubic meters of CNG daily, pushing gasoline consumption to nearly 140 million liters. However, data from the Ministry of Oil shows that the country’s strategic gasoline reserves are barely one billion liters—enough to cover just one week of domestic demand.
If Israel targets just two of Iran's refineries—such as the Persian Gulf Star and Abadan refineries—30% of the country's liquid fuel production capacity, or 800,000 barrels per day, would be lost.
A quarter of the government's budget is allocated to subsidies, which range from monthly cash handouts to heavily subsidized fuel, bread, and other essentials. These subsidies are primarily funded by the domestic and international sale of petroleum products. According to the Supreme Audit Court of Iran, in the first five months of the current fiscal year (starting March 20), the government borrowed 800 trillion rials ($1.3 billion) to cover subsidies—an amount equivalent to one-fourth of the total subsidy expenditure.
The reason for this borrowing is the sharp decline in petroleum product exports due to the significant rise in power plants' demand for fuel oil and diesel, caused by the natural gas shortage. This has resulted in a severe drop in the financial resources for subsidies.
Half of Iran's population lives in poverty, with their livelihoods dependent on government subsidies. If the country’s refineries are attacked, the government will essentially be unable to continue providing subsidies to the people.
Iran is already grappling with an inflation rate exceeding 40%, and the elimination of subsidies and a surge in fuel prices would trigger hyperinflation.
This summer, due to the electricity shortage, Iran's steel production and exports, which account for 16% of the country's non-oil exports, sharply declined. It is expected that this winter, the production of petrochemical products, which make up 30% of non-oil exports, will also drop significantly due to the severe gas shortage.
Iran's winter gas shortage is projected to reach 250 million cubic meters per day, accounting for 25% of the country’s total gas demand. If oil refineries are attacked, the government could lose its ability to supply fuel to power plants, exacerbating the energy crisis.
Crude oil revenues would also be severely impacted in case of an attack on Iran’s production infrastructure. Despite a significant rise in the country's oil exports, only 74% of the government’s oil revenue target has been met in the first five months of the current fiscal year. Even if only the Kharg oil terminal is attacked, Iran would lose 90% of its oil export capacity.
Last year, Iran's oil and petroleum product exports totaled $36 billion, which accounted for 8% of the country's total GDP and nine months of the government's general budget.