6INTRODUCTIONthe case of electricity and water— at a fraction of the cost of production.
These subsidized energy products are among the sheaf of welfare benefits
extended by the Gulf regimes to society in exchange for public support.
Energy is a tool of political control. Since it is provided so inexpensively,
the public treats energy as if it has little value. This is true of citizens born
and raised in the Gulf, but it is also true of expatriate residents: although
they may have come to the Gulf from countries where energy is priced at
or above market levels, they change their behavior when provided with
subsidized energy.
This behavior is now backfiring. With the exception of gas- rich
Qatar, these monarchies face the unintended consequences of using
energy as a political tool: an increasingly acute conflict between sus-
taining exports and maintaining subsidies. As suggested by King Faisal’s
prediction, regimes face a choice between short- term political stability
and longer- term economic sustainability. As populations rise and
energy production reaches a plateau, domestic consumption will gradu-
ally displace exports, as has happened in other oil- exporting states.
Reforms that moderate consumption will be difficult, no doubt; citi-
zens have gotten used to subsidies and won’t want to see them go. But
while difficult, they are not impossible, and such reforms are the only
hope these states have in extending the longevity of oil exports and,
perhaps, the regimes themselves.