INTRODUCTIONare fitted with insulation and other features that minimize energy
demand. Fuel efficiency is a key variable in car and appliance purchases.
When energy prices rise, consumers reduce energy use. They use less air
conditioning, heating, lighting, or fuel, or they upgrade to more efficient
technology. In some countries, electricity prices are high enough to
encourage building owners to generate their own electricity with roof-
top solar panels.
An altogether different incentive structure governs energy use in the
Gulf. When international oil prices are high, exporting countries of
the Gulf undergo an increase in demand and reduced efficiency. Why?
Because high oil prices bring windfall profits, and policy makers come
under pressure to share the wealth. They distribute the windfall in ways
that exacerbate energy demand— by boosting government salaries and
embarking on building programs that increase per capita energy con-
sumption at the very moment the rest of the world struggles to limit it.
Ruling sheikhs have even been known to respond to high international
prices by reducing domestic energy prices, widening the gap between
local and international prices. High oil prices incentivize wasteful energy
consumption in the Gulf because residents receive different signals than
those that moderate consumption elsewhere.
In 2008, while oil had spiked to an all- time high of more than $
per barrel— and with natural gas prices at similar highs— people in the
Gulf were partying like it was 1999. As I chronicled in my 2009 book on
Dubai, gargantuan SUVs filled the superhighways of the Gulf even as
they were being traded in for Toyota Priuses in the West. While Ger-
mans lusted for the zero- emission Passivhaus, the Gulf underwent a
frenzied building boom that covered the landscape in energy- intensive
sprawl. Building insulation, long a standard component elsewhere,
remained a frivolity. On hot summer days, residents swam in artificially
chilled pools or, in Dubai, flocked to the Emirates Mall to ski in full view
of shoppers wearing shorts and tank tops. At the office tower where I
worked, colleagues propped open lobby doors when they went outside
to smoke, so that they could feel a steady blast of artificially chilled air.
I found this kind of energy waste jarring, but it is absolutely rational
given government policy in the Gulf. Electricity, desalinated water, and
transportation fuels are provided at a fraction of world prices and— in