FROM ENERGY POVERTY TO ENERGY EXTREMISM 59Subsidies for energy were partly spurred by the economic transfor-
mation that was underway. The regimes’ energy munificence was also
driven by their newfound control over new energy sources that became
available after nationalization. For decades, natural gas had either been
flared or vented as waste. Meanwhile, governments were building power
grids and beginning to provide electricity to homes and businesses,
most ly by burning diesel f uel. In some cases, t hat diesel f uel was impor ted
at world prices because domestic refining capacity was insufficient or
nonexistent.^19 Burning diesel made little sense when natural gas— a
cleaner, cheaper, and more efficient power generation feedstock— was
being wasted.
After nationalization, with NOCs in control, governments set about
exploiting their gas bounty. They contracted for gas capture and distri-
bution networks. Gas that had been flared or vented was instead burned
as feedstock in power plants. The inefficient diesel- fired plants were
relegated to use during periods of peak summer demand. The newly
nationalized Saudi Aramco built its Master Gas System based on this
principle.^20 With Saudi Aramco in control of the kingdom’s natural
gas, the venting of methane— a powerful greenhouse gas— plummeted.
By capturing and burning fugitive methane, nationalization actually
improved the kingdom’s GHG footprint.^21
Prices reflected the same logic. Since the surplus gas feedstock was
essentially free— and otherwise too difficult to market overseas—
consumers should not have to pay. Electricity prices needed only to
cover costs of infrastructure, operations, and maintenance.^22 Stranded
gas that had once gone to waste was thus used to develop these lightly
populated states, providing improvements in lifestyle while shoring up
political support for the ruling sheikhs.^23
In 1979, oil prices rocketed upward once again, when the Iranian
revolution reignited global alarm over oil supply. The Persian monar-
chy, convulsed by strikes and demonstrations, collapsed. Amid the
chaos, Iranian oil exports of 3.7m b/d suddenly dropped to zero. The
outage— a complete surprise— sent oil prices soaring for the second
time in less than a decade. From $13 in 1979, oil reached $31 per barrel
by the end of 1980.