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Israel an energy superpower? Not quite

The discovery of major natural fuel sources won't translate into a game changing bonanza any time soon

“Israel is becoming an energy superpower,” at least according to its Minister of Energy and Water Resources Silvan Shalom. Apparently he couldn’t help but partake in the enthusiasm when Israel signed a non-binding letter of intent on Wednesday to provide Jordan with 1.6 trillion cubic feet of natural gas over 15 years.

While such triumphant declarations make for great soundbites, they could give rise to unrealistic expectations and even security risks for the State of Israel. Here in America, we actually have the same problem.

Both our countries have discovered promising new petroleum resources, but achieving true energy security requires a more clear-eyed view of common challenges. Indeed, these windfalls are unlikely to displace OPEC’s power over global oil markets or Russia’s prominence in the European natural gas sector.

Yet it has suddenly become common parlance among U.S. officials, journalists, and policy analysts to speak of “the American energy superpower.” In 2012, President Obama declared America “the Saudi Arabia of natural gas.” But abundant natural gas will never set American automobiles free from Persian Gulf energy machinations until Washington adopts a serious national strategy for promoting fuel choice.

True, America has surpassed Russia as the world’s top total energy producer and displaced Saudi Arabia as the number one producer of oil. But the U.S. will not be challenging Riyadh’s status as the most important single arbiter of global prices because unlike the Saudis we put our increased production capacity to use rather than keeping some of it in reserve as a means for manipulating the market.

Meanwhile, high oil costs have become the new normal, with prices up to four times as high as they were just a decade ago.  Economists believe this increase in oil prices added about $235 billion to the U.S. deficit, cost the American economy 1.3 million jobs, and reduced real disposable income per household by approximately $2,000.

And despite proclamations that the U.S. could handle the Ukraine crisis better by accelerating the licensing of facilities to export liquefied natural gas (LNG) to Europe, these complex projects are still in their infancy and not yet anywhere near the scale required to displace Russia from being the continent’s top source for imported natural gas.

Similarly, the Jewish State is not about to become “the next energy superpower”.

True, Israel has discovered large deposits of oil in the form of kerogen, and an innovative company has pursued a pilot project to prove the resource’s commercial viability. But even they admit that a decade from now Israel could only meet between 20 and 40% of its overall needs, suggesting that producing enough oil for significant exports remains an unproven, distant concept.

Just like America, Israel’s transportation sector is deeply vulnerable to foreign energy disruptions. During the war with Hezbollah in 2006, Israel faced the prospect of a crippling cut-off of oil imports because the shipping industry considered Israeli waters too risky to insure inbound oil tankers.

Israel now faces the exciting prospect of energy independence in its electricity sector. Its deep-sea natural gas fields at Tamar and Leviathan were the biggest new discoveries in the world in 2009 and 2010, but they take much of their significance from their size relative to Israel’s population. When it comes to the volume of its gas reserves, Israel is not just no Qatar – it is not even an Egypt.

Despite recent claims to the contrary, this gas is not “Putin’s horror” because it would not be sufficient to singlehandedly threaten Russia’s supreme role in European energy imports. Further, it is not even clear Israel has a viable pipeline route to European markets given the unfriendly nature of Turkey’s government.

The gas contained by Tamar and Leviathan are large enough to boost Israel’s economy and play a positive role in its relationships with Egypt, Jordan, and the Palestinians. But in all three cases such deals are still only tentative and face major domestic opposition.

Additionally, extracting the gas requires billions of dollars in foreign investment, and domestic pressures at home have forced the government to keep moving goal posts for taxation. This is arguably what convinced Australian firm Woodside Petroleum to opt out of a deal this spring that would have given it a stake in bringing Leviathan online and motivated it to help transform the gas into LNG for export.

At this rate, energy expert Gal Luft worries that prematurely proclaiming Israel an energy superpower is “hallucinatory and reckless,” warning that Israel faces a real possibility “the gas will be left in the ground”.

There is a great deal that the U.S. and Israel can do to partner on energy security, from joint R&D on unconventional energy extraction to advising Israel’s Navy how to better protect each of our civilians on Israeli natural gas rigs from terrorist attacks like the rockets allegedly fired at them this summer by Hamas.

Indeed, the recent signing ceremony between Israel and Jordan was hosted by America’s ambassador to Amman because of the role U.S. energy experts played in facilitating a deal between the two sides. At the very least, this announcement is a reassuring step in the right direction for preventing Luft’s nightmare scenario.

Yet we continue to face common challenges in the field of energy security. Let’s not declare victory prematurely.

About the Author
David Andrew Weinberg is a Senior Fellow at the Foundation for Defense of Democracies. He hold a Ph.D in Political Science from the Massachusetts Institute of Technology.
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