People usually wait for the summer to enjoy their annual holidays. But in the Arab world, summer in certain countries is synonymous to suffering, added to the other burdens borne by the citizens, chiefly because of power outages. The causes are many, but mainly involve the failure of the successive governments to bare their responsibilities to build the power plants needed to meet increased demand, as well as corruption, the lack of money or fuel shortages, and/or incompetence. Yet, no matter what the reasons and excuses may be, people do not buy into them, and certainly do not find solace in them in the heat. As a result, people become resentful of their state, especially as it fails to preserve security and sovereignty, then to provide the basic needs of life- such as electricity and even water in some countries. Manifestations of the electricity crisis include well-off households having to rely on private generators in their domiciles or neighborhoods for electric power, despite the fact that this causes pollution, both environmental and noise-related, and entails additional costs for fuel, in addition to the bills paid to the government. Another manifestation is public anger and protests, usually involving the tire-burning – although it causes pollution. In parallel, there is indifference among officials in general regarding the crisis, possibly because they do not suffer from it the way the rest of their compatriots do; subsequently, they fail to address this problem responsibly and in earnest when they are appointed to their posts – a problem that requires a great deal of money, planning and cooperation among relevant authorities. Furthermore, governments often mismanage the way subsidies are provided to reduce energy costs, and the prices of gasoline or fuel used in power plants. A valuable study prepared by Bassam Fattouh and Laura El-Katiri tackled the issue of energy subsidies. Entitled ‘Energy Subsidies in the Arab World', and recently published by the United Nations Development Program's Regional Bureau for Arab States, the research paper explains in detail the many different implications of subsidies for energy resources, and pricing policies. The paper comes up with several inferences, including the possibility –and necessity- of reforming the energy subsidy system in the Arab world, while acknowledging the obvious differences among the pertinent policies of the various Arab countries, and the disparity in their natural and financial resources. The paper argues that while energy subsidies may help achieve a country's objectives, they are a costly and inefficient way of doing so. Energy subsidies also tend to benefit well-off households and industries more than poor households; in addition, these subsidies have serious implications on efficiency and the optimal allocation of resources. Despite this, the paper assumes that energy subsidies provide important support for the poor in many parts of the Arab world. This, in addition to providing support for industry, requires any attempts to reduce or eliminate subsidies to take place in parallel with compensatory programs, to avert a decline in households' welfare and the erosion of the competitiveness of local industries relative to similar foreign ones. Although Fattouh and El-Katiri agree with a large number of Arab economists calling for reforms of energy pricing mechanisms in the Arab world, they acknowledge that such reforms face serious difficulties over the short term. Therefore, they argue for the need to adopt reform policies in the medium and long terms instead. This is not to mention the need to factor in the different policies pursued by the various Arab countries, rendering it futile to propose a unified Arab plan for reform in this regard. Going back to the daily problems experienced by the ordinary citizens, one may ask the following questions: Did energy subsidies succeed in reducing the gap between high-income and low-income households in the Arab countries concerned? Is this gap not growing more day after day, regardless of these subsidies? If the national electric power companies have failed – and they have indeed, as evident from the growing daily power outage times year after year-, then why are these companies refraining from partnering up with the private sector for their projects? If the problem lies in funding, then why not enlist the help of Arab funds, which usually offer soft loans and longstanding expertise? For example, it was the Arab Fund for Economic and Social Development that had planned, funded and executed a project for the interconnection of Arab electricity grids. So the question for the national electric power companies is, why not solicit loans from local and regional banks and financial institutions? In truth, despite the global financial crisis, the majority of these institutions currently enjoy a surplus in deposits. Or why not collaborate with the Arab Petroleum Investments Corporation (APICORP), an offshoot of OAPEC which runs an inter-Arab trade financing program dedicated to petroleum transactions? Given that some national electric power companies complain of fuel shortages, then why not cooperate more closely with Arab national and private oil companies, which have achieved significant successes in their businesses both globally and regionally? What obstacle is there for them in dealing with Arab electric power companies on an economic and commercial basis? The bottom line is that it is obvious for the public opinion observing the programs and procedures used to finance power generation that state-owned institutions continue to operate in a conventional manner, i.e. relying on self-financing to procure fuel. This happens instead of going to the modern markets, similar to what electric power companies do in the rest of the world. Since national electric power companies are required to expand their horizons, they should also encourage the use of alternative and sustainable energy sources to generate power, in order to reduce pressure put on them. Clearly, electric power consumption in the Arab world is steadily increasing each year. This is an inevitability that goes hand in hand with a growing population and an improving standard of living, thereby increasing consumption levels. Thus, persisting in current policies and practices will only lead to a dead end, and more crises that increase in severity year after year. *. Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)
