Low price oil may allow Middle East countries to ween population from subsidies
Residents of the Middle East are ready to give up energy subsidies, overturning another long-held assumption about the politics of oil producing countries, according to new research from Rice University.The lower profit margin on oil makes subsidies uneconomical for producing governments and at the same time the lower prices means they don't need to subsidize as much. The shale revolution has made OPEC market distortions harder to justify both at home and abroad.
Persian Gulf countries have posted some of the fastest increases in energy demand in the last decade, largely due to low prices subsidized by ruling monarchies. Many analysts assumed that most residents considered cheap energy a birthright in countries with some of the largest oil and gas reserves.
Those attitudes are changing, though, according to a poll by Jim Krane, a fellow for energy studies at Rice’s Baker Institute. Residents of Saudi Arabia, United Arab Emirates, Kuwait, Oman, Qatar and Bahrain are willing to give up their subsidized energy if it’s in the national interest or if they get something else in return.