76UNNATURALLY COOLfor three hours, you can run it for eight hours. Motorists can drive more
often, commute longer distances, or leave their vehicles running (with
the a/c on) while they shop.^16
In the oil- importing world, the high prices of the 1970s transformed
consumption, steering consumers toward more energy- efficient equip-
ment and behavior. But in the Gulf, residents received the opposite mes-
sage. When international oil prices were high, Gulf rulers awash in
windfall oil rents often took the opportunity to spread the wealth. They
granted even deeper discounts on electricity and fuel prices that were
already divorced from reality. Later, when international prices fell, cash-
strapped Gulf governments bent over backward to maintain fixed energy
prices and hold up their end of the social contract.
In short, regimes shielded their people from pricing signals. There was
no downsizing, no insulating of homes, no technology upgrades, and no
fuel switching because there was no local understanding of the true value
of the energy on offer. Generous welfare benefit schemes, which included
subsidized water, electricity, and fuel, were important components in
rulers’ plans to jumpstart growth during the nationalization period. But
subsidies also encouraged demand for the resources themselves, which
were sold at prices that allowed consumers to use energy without con-
cern for efficiency or the environment— or really without much thought
at all.
Rising incomes in oil- exporting countries would have ignited energy
consumption on their own. The combination of incredible income growth
and low, fixed prices created extraordinarily fertile conditions for demand
growth. For the onetime nomads who had conditioned themselves for
survival in one of the earth’s harshest environments, it was time to relax.
“There was a feeling that after a long period of deprivation and poverty
it was about time that we enjoyed ourselves,” says Abdulkhaleq Abdulla,
an Emirati political scientist. “The government’s duty was to establish the
best subsidized welfare system on earth.”^17
As time wore on, state- owned utilities found themselves trapped in a
game of catch- up, making continuous capital investments to meet gal-
loping electricity demand. As expenditures rose, fixed tariffs recovered
fewer and fewer of the increasing costs involved in providing power. The