UNNATURALLY COOL79provide the foundation for strong relations with the United States,
which come with significant security benefits. America spends $50 to
$100 billion a year to protect the Gulf monarchies from external threats.^24
In return, the Gulf states are expected to keep the global economy sup-
plied with oil.
For Saudi Arabia, spare oil production capacity is an important
strategic asset, which plays a key role in maintaining US interest and
support. If Saudi domestic consumption eats the kingdom’s spare
capacity, Washington may grow less willing to maintain its side of the
oil- for- security arrangement,^25 exposing Saudi Arabia and the other
monarchies to the vagaries of unshielded competition with unfriendly
neighbors like Iran as well as nonstate Islamist opponents that command
some internal support. High demand has security implications as well.
The early decisions by the Gulf monarchies to provide heavily subsi-
dized energy triggered a process of path dependence, which placed the
region on a downhill track to energy intensity. All sectors contributed
to the growth in demand. Investors seized competitive advantage by
moving energy- intensive industries to the Gulf. High- paying jobs and
the low cost of living attracted foreigners, enlarging the population.
Planners given swatches of empty desert designed low- density cities of
big homes and spacious and inefficient office buildings based on assump-
tions of cheap energy. Cheap energy allowed developers to cut costs on
building materials and disregard public transport in favor of personal
vehicles. Over time, high individual rates of consumption were locked in.
A HYPOTHETICAL PRICE INCREASEHow can we be sure that it’s low prices and not the other factors men-
tioned that are the main driver behind the Gulf ’s energy- demand quan-
dary? One way to test this hypothesis is by comparing demand in two
places with many similarities but where prices are different.
Take Abu Dhabi and Arizona. Both have hot climates (average tem-
perature 81°F [27°C] in Abu Dhabi and 75° F [24°C] in Phoenix) and high