Jim_Krane]_Energy_Kingdoms__Oil_and_Political_Sur

WE HAVE A SERIOUS PROBLEM91

exportable commodities is fundamentally different than rent- funded
benefits such as housing, education, and subsidized food staples. The
energy burden manifests itself not only in terms of cost (what the gov-
ernment spends) but also in lost revenue (what the government earns).
States have temporary policy options to help them cope with fiscal
burdens. They can cut spending or issue debt. Coping with a loss in rev-
enue is tougher. If the state forces national oil companies to divert a
portion of their output into the domestic economy— where it is given
away or sold at reduced prices— the profitable export portion shrinks (see
figure 6.1).
The situation with natural gas illustrates the danger. Despite the abun-
dance of gas in the region, the Gulf— outside of Qatar— is now a net gas
importer. Low prices (fixed at around one to two dollars per million
BTUs) stimulated demand but also stifled production. Making matters
worse, gas production in the Gulf is getting more expensive. The supply
of “associated” gas— that produced with oil— is no longer sufficient.
Countries are increasingly turning to unconventional gas, including geo-
logically difficult “tight” gas, bound up in low- porosity rock, as well as

0%

5%

8.2%

5.0%

14.0%

18.0%

24.7%

13.1%

10%

15%

20%

25%

30%

1965–1969

1970s 1980s 1990s 2000s

2010–2016

FIGURE  6.1 Average percentage of GCC oil production consumed domestically, per
decade.

Domestic demand as a portion of oil production has crept higher over the decades.

This chart depicts average oil demand growth for the GCC per decade.

Source: BP, Statistical Review of World Energy 2017 (London: BP, 2017).