104IRAN AND DUBAI LEAD THE WAYal- Khaimah found paltry deposits, and the other three sheikhdoms found
nothing.^19 Even so, oil earnings dominated Dubai’s economy for about a
decade. In 1975, oil rents provided two- thirds of Dubai’s GDP, the highest
level it would ever reach. Production peaked at 420,000 barrels per day
in 1991 and has been dwindling ever since. These days, Dubai’s daily
draw is in the low tens of thousands of barrels. Abu Dhabi’s is around 4
million.^20
Thankfully, Dubai could count on energy supply from its cousins next
door. Over the years, Abu Dhabi provided a seemingly bottomless sup-
ply of cut- rate natural gas for power generation and industry.^21 But by
2008, Abu Dhabi was facing a demand crunch of its own. It could no
longer increase gas supplies to Dubai. Confronting continued increases
in electricity demand, Dubai was forced to turn to market- priced imports.
That year— just as the financial crisis unfolded— the UAE became a
net importer of natural gas.^22
The new reality of more expensive energy dawned in Dubai before it
did in the rest of the Gulf. In 2008, Dubai began to pass those increased
prices along to consumers. The Dubai Electricity and Water Authority
(DEWA) raised power and water rates to cost- reflective levels on com-
mercial, industrial, and foreign residential customers. Citizens, who
make up just 5 percent of the city’s overall population, were exempt.
This left foreign residents paying rates that were roughly quadruple
those of UAE nationals— and meant that Dubai citizens continued feast-
ing on subsidized energy as if the boom had never ended, undermining
the austerity needed to prevent Dubai’s financial collapse. In 2010, Dubai
had to start importing liquefied natural gas (LNG) at around $10/MMBtu,
five times what it paid Abu Dhabi. The crisis pushed Dubai’s leadership
to opt for another increase in utility rates.
Dubai’s ruler Sheikh Mohammed bin Rashid al- Maktoum agreed that
citizens also needed price signals to change their consumption behav-
ior. Despite perceptions of citizen entitlement to subsidies, the ruler
approved a 30 percent increase in electricity prices. Half of that increase
would be imposed through a 15 percent hike in electricity consumption
tariffs on all customer classes, including citizens. The other half would
take the form of a surcharge to cover imports of LNG. The ruler also