WE HAVE A SERIOUS PROBLEM95the Middle East is growing quickly. The UAE’s coal consumption grew
by 24 percent in 2016, leading every other country in the world except
Singapore.^29
OPTIONS FOR THE FUTUREThe Gulf monarchies have four broad policy choices to deal with their
energy dilemma. Three of them attack the problem from the supply side.
First, they can invest upstream (upstream meaning the point of produc-
tion, with refining as downstream) to try to raise oil and gas production
beyond current levels. Increased supply would, at least temporarily,
accommodate growing domestic demand alongside exports.^30 Second,
they can diversify their supply. Instead of generating electricity solely from
oil and gas, they could develop alternate sources such as nuclear, renew-
ables, or coal. These would offset the continually growing demand for oil
and gas. Third, they could diversify their economies beyond hydrocarbons,
seeking alternate sources of rent that can compensate for future reduc-
tions in exports. Post- oil Dubai has shown that diversification can take
place without altering the character of governance.
The fourth option is to attack demand. The Gulf monarchies can try to
stop or at least slow the relentless growth in energy consumption. Rein-
ing in demand— cutting growth from, say 7 percent a year to 2 percent—
would allow them to maintain exports for a few more decades. The most
effective way to reduce demand is to make energy less attractive by
decreasing subsidies and raising prices on fuels, desalinated water, and
electricity.^31 Once prices are raised, conservation and efficiency programs
can ease the burden of increased pricing.
In reality, the monarchies are exercising all these options, at least in
part. But the fourth option, demand- side reforms that target energy
subsidies, has long been seen as impossible by political scientists and
regional elites. On- the- ground reality has, until recently, backed their
assertions. Previous attempts to raise electricity prices on the citizen
residential sector, the most politically sensitive consumer group, have