Dynamics of Petrol Price Changes Shock: A Policy of Stabilizing or Gradual Changing

Abstract

As a strategic commodity, petrol has a profound effect on both government and society. Therefore, the government as the determinant of petrol price in Iran because of the petrol price changes have economic, political, social, cultural, environmental effects has always been challenged with respect to petrol prices. In recent years, various policies have been adopted, including gradual change, one-off change, and petrol sequestration, each with different consequences. On the other hand, the price of petrol is influenced by various factors as well. Therefore, it is essential to understand the structure of petrol pricing and price change policies in the country and its effects. For this purpose, the system dynamics approach is used as a holistic and dynamic problem solving method to model the structure governing petrol price and to investigate and simulate the effect of different policies on model behavior in this paper. The model simulation results showed that the gradual pricing policy was appropriate with the assumption that the dollar and petrol price did not change with inflation the year before and that the price stabilization policy was not appropriate.

Keywords

• document model building (dmb)
• system dynamics approach
• petrol price
• stabilizing policy