124SHIFTING GEARS IN SAUDI ARABIAThe outlook was sobering. The kingdom needed an estimated $133 bil-
lion to keep up with electricity demand, which was expected to more
than double over the coming decade.^16 On top of those direct costs was
the even more onerous opportunity cost— the potential revenue squan-
dered by burning so much oil and gas rather than exporting it at mar-
ket prices. Saudi Arabia could not afford to continue along this ruinous
trajectory much longer.
Most of the growth was being driven by simple demand for air con-
ditioning. Despite the damage to the kingdom’s financial and environ-
mental health, almost no individual consumer was willing to spend the
money to insulate buildings or upgrade windows, either of which would
cut household demand by a third. Since electricity was so cheap, con-
tractors complained that the additional 5 percent cost in weatherization
expenses went uncompensated. One frustrated official said the refusal
to insulate buildings was costing the kingdom 30 million barrels of oil
per year.^17
Water use was another big concern. Daily consumption had reached
66 gallons (250 liters) per person, versus a global average of just over 20
(80 liters). Officials complained that Saudi Arabia, without a single river
or natural lake, consumed water at rates nearly as high as Canada, a
country with fresh water covering 9 percent of its surface area.^18 The dis-
tortions caused by underpricing threatened the very foundations of the
Saudi state. The “untouchable” cradle- to- grave subsidies on energy began
to look like teetering anachronisms.
Would Muhammad bin Salman feel that his legitimacy depended on
maintaining the big energy giveaway? King Abdullah hadn’t even been
buried a year by the time Saudis learned the answer. On December 28,
2015, King Salman’s cabinet announced that a full roster of energy price
increases would take effect across the kingdom in four days— on Janu-
ary 1, 2016. The price hikes increased the costs of all forms of energy and
affected all customer classes, from factories to shops, government offices
to homes. Saudi citizens would see their household electricity and water
costs rise, as would the price of transportation fuels. Al- Shehri’s prepa-
rations ensured that poor Saudis could be exempted from the increase
as long as they kept their consumption within reasonable bounds.