PDF - Graduate Institute of International and Development Studies

But the industrialization process has also led to the growth of industries that
specifically require electricity rather than other forms of energy – notably aluminium
smelting. This industry has long since been part of the diversification strategy of Bahrain
(ALBA) and Dubai (DUBAL), and the success of these pioneering ventures is motivating
major expansion projects in various GCC countries.
1.1.3. Low prices
The third fundamental determinant of energy consumption is price. The cost of energy to
industry as well as to the final consumer has been kept low, whether in the form of liquid
fuels (primarily for transportation) or in the form of electricity.
Access to energy at prices that are unrelated to the opportunity cost of the primary
source on international markets has been a key component of the political compact
between the Gulf rulers and their people, and prices have not been raised and have even
been lowered, even at times of increasing international prices, in order to compensate for
the increasing cost of imported goods. 2 It may not be appropriate to speak of
subsidization, because even at the low domestic prices the energy companies can cover
their costs and make a profit. However, it is very clear that the same primary sources if
sold internationally would fetch a much higher price. In cases in which the primary
source is not exported at all – such as that of natural gas in Saudi Arabia – the low price
has discouraged exploration and increasing production capacity, and has induced
wasteful consumption.
In the case of electricity, which is the main form of energy consumption in
households and in the commercial sector, the wasteful pattern of consumption is very
obvious. It is also deeply rooted, in the sense that building codes and standards have paid
little attention to containing power requirements. On top of large and badly insulated
homes, the region is characterized by wasteful consumer habits, with ambient
temperature kept exceedingly low, abundant illumination based primarily on traditional
incandescent bulbs, and unrestrained running of appliances (the television set switched on
for twenty-four hours a day).
2 For example, Saudi Arabia lowered the domestic price of petrol in 2006, when oil prices were exploding,
to compensate for the high rate of inflation. With respect to electricity, practices range from providing
electricity for free for all national households in Qatar, to a level of tariff in Saudi Arabia that is considered
to be high enough to encourage some savings – of which there are few signs, however.
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