WE HAVE A SERIOUS PROBLEM89oil prices that followed the high- price heyday of the 1970s and that put
severe pressure on state finances. Indeed, while the price spikes of 1973
and 1979 brought the monarchies a huge influx of cash, high oil prices had
two additional pernicious consequences. First, they killed off demand
in importing countries (as we saw in chapter 5); second, they incentiv-
ized the discovery of alternative oil supplies. The international oil com-
panies that had been kicked out of the developing world soon found
new drilling grounds— and with oil prices so high, they worked hard to
produce and sell as much oil as possible. The next frontiers for oil and
gas moved to the freeze- blasted tundra of Alaska’s North Slope, the
hurricane- ridden Gulf of Mexico, and the storm- lashed North Sea. As
a result, oil entered a long period of lower prices, a manifestation of
the cyclical nature of crude oil pricing that has only grown more famil-
iar. From the mid- 1980s until 2003, with few exceptions, oil remained
within a price band of ten to twenty dollars a barrel. This long “oil bust”
caused ruling sheikhs in the petrostates of the Middle East to reassess
their freewheeling spending.
Even with oil revenues collapsing and debt rising, the sheikhs’ options
were limited. A chorus of scholarly voices saw benefit reform as impos-
sible. Books and articles assessing the bust period steadfastly maintained
that “populations were unwilling to countenance any reductions in wel-
fare spending”^12 and that “welfare services to the local population can
be seen as the single most important source of political legitimacy.”^13
Cutbacks might bring political change, even the collapse of the state.^14
A few authors warned about these accumulating fiscal commitments
and their effects on energy demand. Even so, tinkering with social spend-
ing was said to be freighted with political risk. Hertog and Luciani
addressed— and dismissed— the possibility of rationalizing energy prices,
conceding that raising residential electricity tariffs was nigh impossi-
ble because “reduced prices have traditionally been perceived as part of
the ruling bargain and attempts to increase them have been repeat-
edly reversed.”^15
More recently, after international oil prices returned to higher levels,
Gause noted that the monarchies proved their resourcefulness and dura-
bility by surviving the oil bust and the Arab Spring. But he argued that
reforming the rising energy consumption that besets Saudi Arabia will