Stability versus sustainability: energy policy in the Gulf monarchies

Rising consumption of oil and natural gas inside the six Gulf Arab monarchies threatens to displace hydrocarbon exports that have long provided a large source of GDP. This trend is, in large part, a result of subsidized energy pricing and distribution, practices which form an integral part of rentier structures of political control. However, these practices are insufficiently analyzed in the rentier literature. This dissertation addresses this shortfall by incorporating the theoretical significance of energy as a physical commodity – rather than as a source of rent – into the rentier literature. Energy subsidization has fostered within these states a structural dependence that has driven choices in industrialization, city design, technology preference and use, and personal habits. These subsidies have also helped build and maintain public support for unelected regimes, alongside the well-known role of energy rents. Energy thus has a conflicting dual role in the rentier state that contributes to the difficulty of subsidy reform. Externally, energy exports are the main source of state revenue; but domestically, energy is an important source of political support. The literature’s portrayal of subsidies as unreformable citizen entitlements conflicts with the increasing economic imperative of reforming these distribution practices. Since rentier consumption patterns threaten the flow of rents, the self-defeating nature of domestic resource distribution is emerging as a long-term weakness within rentier theory. I present evidence that reforms have already taken place, despite theoretical predictions to the contrary, and demonstrate the economic imperatives that make further reforms likely in at least two of the six states: Saudi Arabia and the United Arab Emirates. I also show that citizen understanding of energy subsidies is more nuanced than the entitlement portrayals found in the literature. This dissertation suggests revising the theory to accept a more flexible interpretation of subsidies as customary privileges, which allows for reform of these practices. Reforms in rentier monarchies’ energy policies are important not just because they challenge the most important theories of governance of these states, but because examining these reforms allows for understanding the difficult tradeoffs between politics and economics that underlie the survival of these peculiar regimes