Jim_Krane]_Energy_Kingdoms__Oil_and_Political_Sur

82UNNATURALLY COOL

energy prices, homes and buildings in Arizona are built with energy effi-
ciency in mind. Most in Abu Dhabi are not. They typically lack insula-
tion, efficient controls, shading, and energy- saving appliances. Even if
an Abu Dhabi resident behaved in exactly the same way as an Arizona
resident, she would consume more electricity.
Table 5.5 extends this method across energy products in the Gulf.
It shows reductions in long- run demand that might be expected from
raising fixed prices to world market levels. The hypotheticals pro-
vide some interesting findings. Kuwaitis undergoing a massive price
increase to recoup the full costs of their oil- generated electricity might
reduce their consumption by as much as 59 percent. While such a huge
increase in price is unlikely, this calculation is useful in showing how

TABLE 5.5 Possible reductions in long-term demand

Price

(US$)

Unsubsidized

price (US$)

% price

increase to

displace

subsidy

% decrease in

long- run

demand at −0.3

Kuwait: electricity 0.007 0.135 1829 −59
Kuwait: gasoline 0.23 0.65 183 −27
Saudi Arabia: gasoline 0.16 0.65 306 −34
Abu Dhabi: electricity
(expatriates)

0.041 0.089 117 −20

Abu Dhabi: electricity
(cit i z ens)

0.014 0.089 536 −43

Oman: electricity 0.026 0.1 285 −33
Oman: gasoline 0.31 0.65 110 −20

Note: Electricity prices are in kWh, and gasoline is priced per liter. Recent prices and estimates
of unsubsidized prices compiled by author. Unsubsidized prices are based on those prevailing
in 2014. Price elasticity estimate is based on the lower figure used in Pedro Rodriguez, Joshua
Charap, and Arthur Ribeiro da Silva, “Fuel Subsidies and Energy Consumption: A Cross-
Country Analysis,” Kuwait Selected Issues and Statistical Appendix, IMF Country Report
(Washington, DC: International Monetary Fund, June 2012). Demand effect calculations are
based on energy demand formula in Rodriguez et al. (2012), which uses a nonlinear function
that reflects effects of large price increases. Expatriates receive smaller energy subsidies in some
countries. For calculations and formulae, see Jim Krane, “Stability Versus Sustainability: Energy
Policy in the Gulf Monarchies,” Energy Journal 36, no.  4 (2015), http: //dx .doi .org /10 .5547
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