Gasoline subsidy in Islamic Republic of Iran is a controversial issue. While a group of politicians believe that its merits outweigh its costs, some economists believe that its harms exceed the benefits. A new approach is taken to study the changes in social welfare because of gasoline subsidies for the period 1987-2005. The findings indicate that the consumers' surplus has declined over time for a representative consumer. A large population growth, inflation and non-substitutability of gasoline with other goods might have caused this phenomenon. Copyright 2008 The Authors. Journal compilation 2008 Organization of the Petroleum Exporting Countries.