SHIFTING GEARS IN SAUDI ARABIA117Energy technocrats understood the danger posed by the kingdom’s
yearly 6 percent growth in oil consumption, which had compounded in
the decades since the oil sector had been nationalized. Saudi Arabia’s
population had nearly quintupled since the 1970s. Wealth per capita rose
almost ninefold. The country’s energy- intense industrial structure added
complexity and further sources of demand. But policy had not kept pace.
Saudis were paying an average of just 3.7 cents per kWh for electricity
that cost the kingdom nearly 22 cents to generate, given the world price
of the crude oil and diesel fuel used as feedstocks.^2
The losses being racked up by the domestic energy business were
shocking— and embarrassing. Engineers and economists inside govern-
ment ministries, universities, and especially at the national oil com-
pany, Saudi Aramco, were frustrated by the king’s caution. “The king is
a very old man. He is like a grandfather. He doesn’t want to be troubled
with the intricacies of policy debates,” a Saudi oil sector technocrat told
me over mocktails in an al- Khobar restaurant in 2012, during Abdul-
lah’s reign. “No one knows what can be done.”
Just as in Iran, the kingdom’s subsidies were exacerbating inequality.
The rich were capturing disproportionate shares of subsidized energy.
The effects damaged long- cherished institutions like asabiyya, the
longstanding tradition of Bedouin egalitarianism. Tribal code consid-
ered leaders who shared similar fatherly lineage as equals, with the ruling
sheikh considered “first among equals.” Now, subsidies were aggravating
once minor differences in social class and status.
Subsidies also led arbitrage opportunists to take advantages of price
differences in neighboring countries. Saudi diesel fuel that sold for the
equivalent of 27 cents per gallon was being trafficked from Turkey all
the way to Oman. “We’re actually smuggling the subsidy,” lamented
Majid al- Moneef, a prominent Saudi energy economist and member of
the Shura Council, which serves to advise the king. “We’re subsidizing
all the trucking that goes into the GCC. All the trucks that come from
Turkey, Jordan, Lebanon, Syria, and Iraq, they all come into Saudi Ara-
bia, and they fill up on the way in and the way out. We’re sending our
subsidy not to our needy, not to Yemen, but to Qatar and the UAE! These
are very rich countries.”^3