How will "petroshekels" change the world?

The standing joke among Jews is, "If we're the Chosen People, why didn't God promise us some land with OIL under it?" As it turns out, He did.

Recent discoveries -- over the past several years -- put the amount of natural gas reserves in Israeli territorial waters at as much as 26 trillion cubic feet. That's roughly triple what Israel will consume over the next 20 years, meaning much of it can be exported. But compared to Egypt's 77 tcf of gas reserves, Israel's natural gas discoveries are not quite Earth-shaking.

Currently, Israel imports coal for domestic electricity, supplemented since 2004 by natural gas from the offshore Mari-B field twenty-five miles from the southern port of Ashdod. More gas comes from Egypt, arriving near Ashdod via an undersea pipeline. Indeed, despite the excitement over the Leviathan field, Israel signed a new twenty-year gas purchase agreement with Egypt earlier in December to supply several industrial entities, including the Dead Sea Works and the Haifa refinery.

If the riches of the Leviathan field are confirmed, production could begin by 2016. In that scenario, Israel could eventually become a net energy exporter despite still needing to import oil to refine into gasoline and other products. Apart from notional energy independence, using natural gas from its own fields would save Israel $4 billion in imports annually while boosting gross national product. Plentiful indigenous hydrocarbon supplies could also prompt the development of new industries. For the time being, though, Israel must resolve a variety of problems before it can begin reaping the full benefits of the new discovery.

However, Israel sits atop another energy resource: oil shale. Up until the end of 2010, it was believed that Israel had about 4 billion barrels of oil in extractable oil shale. Given that the Saudis produce just under 10 million bbl/day, those 4 billion bbl are equivalent to about 400 days of Saudi Arabia's production.

But new discoveries of oil shale in Israel and new techniques of extraction put the latest estimates of available oil from Israeli shale at 250 billion bbl - just shy of Saudi Arabia's proven reserves of 260 billion bbl.

What is less well-known, but even more dramatic, is the work being done on this country’s oil shale. The British-based World Energy Council reported in November 2010 that Israel had oil shale from which it is possible to extract the equivalent of 4 billion barrels of oil. Yet these numbers are currently undergoing a major revision internationally.

A new assessment was released late last year by Dr. Yuval Bartov, chief geologist for Israel Energy Initiatives, at the yearly symposium of the prestigious Colorado School of Mines. He presented data that our oil shale reserves are actually the equivalent of 250 billion barrels (that compares with 260 billion barrels in the proven reserves of Saudi Arabia).

Independent oil industry analysts have been carefully looking at the shale, and have not refuted these findings. As a consequence of these new estimates, we may emerge as the third largest deposit of oil shale, after the US and China.

Moreover, Israel is developing extraction techniques that take the oil out of the shale while the shale remains underground, at per-barrel costs of $20 or less.

What would it mean to the world if Israel were able to produce oil at rates similar to Saudi Arabia?

1) Lower oil prices overall. More supply would allow oil prices to fall to levels more consistent with historical patterns. Cheaper oil would help the world's industrialized economies to grow.

2) A loosening of OPEC's stranglehold on world oil markets. Any significant non-OPEC production reduces OPEC's leverage and provides a safety valve against production restrictions by one or more OPEC nations.

3) A flip in American foreign aid payments. Israel would no longer need aid from the USA and would be able to buy American military hardware for cash.

4) A revision in geopolitical and global military postures. Unlike oil from the Persian Gulf that has to transit the Suez Canal or circumnavigate Africa, Israeli oil can be delivered to tankers in the Mediterranean. Consider the way Europe reacted to the potential disruption of oil production in Libya, an unstable and hostile producer in the Mediterranean; the value of a politically stable and friendly oil source in the Mediterranean would cause the West to put more pressure on the Arab world to declare peace with Israel and cease threatening a valuable energy exporter. It would also change the calculus with respect to the threat Iran and its nuclear program pose to Israel.

5) A potential recession in global terrorism. If the West uses Israel's rise as an oil exporter as an impetus to stand up to Iran, the Iranian regime may find it too costly to continue exporting terrorism via Syria to Hezbollah, Hamas and other groups around the world. Without Iranian sponsorship, jihadist movements in many places would become too weak to stand up to more moderate movements. And to the extent that Israel's competition with Saudi Arabia in the oil markets and its new geopolitical importance made life harder on Saudi and other Gulf oil sheikhs and emirs, they would have less disposable income to spend on al-Qaeda and the Muslim Brotherhood.

Not surprisingly, Hezbollah wants to throw a monkey wrench into Israel's plans by prodding Lebanon to claim part of Israel's territorial waters for its own. But Israel has plenty of gas for its own use in undisputed waters and has the technology to defend its claims against Hezbollah attacks by missiles or suicide boats. And Hezbollah can't make any claim over Israeli oil shale.

Let's hope this brave new world opens up soon. We will all benefit.

Legislator + Regulator + Disaster = Quagmire

In the two months since the Deepwater Horizon drilling rig exploded and sank, the ruptured wellhead has been spewing crude oil and gas at a terrifying rate. At the same time, news reports about the Obama Administration's response to the spill have more resembled water torture: they've come out in a slow dribble. But we've finally seen enough to detect a pattern:

• Despite early offers of help from the Netherlands and other nations, the Jones Act prevents foreign-flagged and foreign-crewed ships from joining the containment and cleanup effort in the early days of the disaster.



• The Environmental Protection Agency decrees that when skimmer ships fill with oily water and allow the oil to float to the top, they cannot discharge the cleaned water into the ocean because it doesn't meet EPA standards for discharge water purity.



• The national inventory of skimming equipment, pre-positioned around the country in case of oil spills, stays largely where it is because of the regulations that call for it to be available for potential disasters rather than redirected to a single catastrophic spill.



• The State of Louisiana is prohibited from building temporary sand berms between offshore barrier islands to block the oil from reaching coastal wetlands because proper environmental impact analysis of the sand dredging and alteration of coastal current hadn't been done. When the Administration relents, it does so reluctantly and only partially, and when Louisiana finally begins constructing berms, regulators shut down the sand dredging essential to supplying the construction, again due to environmental impact concerns.



• The Coast Guard inspects skimming barges operating off the Louisiana coast and shuts them down for a day due to insufficient fire extinguishers and life preservers on board.

The pattern, of course, is the slavish adherence to regulatory regimes during this catastrophic spill without regard to the scale and nature of the disaster.

The question has been asked widely: why didn't President Obama issue an executive order waiving the Jones Act restrictions, as President Bush did in the wake of Hurricane Katrina? Some speculate that he's been reluctant to offend the maritime unions due to his reliance on support from organized labor.

But that doesn't explain why he has also failed to issue executive orders to waive EPA restrictions and other regulations. After all, doing so would facilitate workers getting onto containment and cleanup jobs, even if it would potentially dismay environmentalists. And even environmentalists must be at a loss to understand why the regulations that protect wetlands and coastal ecosystems in normal times should prevent defensive measures against a massive flood of oil.

Maybe it's not his obligations to special interest groups that make President Obama reluctant to waive these regulations. Maybe he just likes regulations.

President Obama had little executive experience before ascending to the Presidency. His public service was as a legislator. Legislators create laws, which become regulations. That's as far as legislators go: the implementation of laws and regulations fall to the executive.

So a politician with legislative experience but no executive experience becomes conditioned to believe that all you need to solve any problem is a law and the regulations that translate that law into specific instructions. The legislator isn't tasked with implementing that law in the real world, nor is he directly exposed to the direct results of the law and the measures of its success or failure -- there may be many years and obfuscating factors separating the passage of the law and the first election after its failure becomes evident, so the verdict of the ballot box is an inefficient tool for teaching legislators how to craft laws that work.

So here is President Obama and his coterie, trained up in the belief that laws and regulations solve problems. The idea that solving a problem might require waiving regulations never enters their minds.

And here's David Axelrod on The Daily Show, confronting Jon Stewart's question about whether the Obama Administration has demonstrated sufficient competence to be trusted with ever more regulation of Americans' lives:

JON STEWART, HOST: It's clear that this administration believes that government can have a stronger hand in regulating Wall Street, in regulating energy, in doing these things. But, has government during this time proved itself competent? And are our only two choices sort of an incompetent bureaucracy that doesn't quite regulate properly or free market anarchy? Before you can make the case that this administration and government can effectively regulate shouldn't they, you know, the MMS case makes a pretty clear point that the regulatory system is somewhat broken, and you guys had a chance to...

DAVID AXELROD, SENIOR OBAMA ADVISOR: The answer Jon is not to abandon the notion that there have to be rules and oversight. The answer is to make it, to make it work better. There's a long legacy there at MMS, and frankly at other agencies of government because the last administration wasn't really interested in regulating.

STEWART: But why then, why not then go in and really, with the urgency? You know, the fear is the government is not agile enough, is not urgent enough to deal with things like a catastrophic oil spill.

AXELROD: There is, there is no doubt that in retrospect we would have liked to move faster on the MMS situation, but understand that we were also dealing with the economic crisis, and, and, and, and, and the wars, and a whole range of issues, and we, that was, that was a defect that we're correcting and moving aggressively to correct now. But the answer isn't to walk away from it. I think we tested the proposition of what no regulation means. What you get, you get the leak, you get the mine disaster in West Virginia, and you get an economic crisis. And everybody recognizes that government has to play a role. It shouldn't be an oppressive role, but there has to be some firm oversight and some rules of people respond to. These, you know, it's pretty clear the oil industry is not going to regulate itself.

STEWART: But do you think, I guess my point is before you have the opportunity, before you can earn the ability to go in and, and, and do that, don't, don't we have to show a certain baseline level of competence.

Note that Axelrod mentions both the Deepwater Horizon disaster and the West Virginia mine disaster as "what no regulation means." But here's the thing: there were and are plenty of regulations on offshore oil drilling rigs and on coal mines. The problem was not the absence of regulation, but the Obama Administration's blind belief that merely having regulations in place ensures that those regulations will be followed properly.

So have a little sympathy for President Obama. When he refuses to waive Federal regulations in order to allow an all-out effort to contain and clean this ever-burgeoning catastrophe, it may just be because he doesn't know any better.

On the AP wire - but not in the USA

Interesting that this AP story isn't being reported in the USA. Yahoo! Singapore and the Jerusalem Post, yes, but not even on the AP's own Web site Stateside. Maybe the headline is just too much even for AP's US staffers to stomach:

China to continue efforts to bring peace to Darfur

The peace of the grave, for Black Darfurians, that is.

BEIJING - China will continue its efforts to help bring peace to the troubled Darfur region, Vice President Zeng Qinghong said Wednesday during a meeting with a top Sudanese official.

Sudanese First Vice President Salva Kiir was in Beijing as part of a six-day visit to China. He said he appreciated China's role in helping resolve the bloodshed in Darfur, where more than 200,000 people have been killed and 2.5 million others displaced since February 2003, the official Xinhua News Agency reported.

"China's stance on the Darfur issue is consistent and China has played a constructive role," Zeng said, according to state television. "China will actively push for an early resolution to the Darfur issue."

Consistent, yes: rape and slaughter in Darfur are insignificant unless they impact Chinese commercial interests.

China's involvement in Sudan is becoming a liability as the country tries to portray itself as a responsible power while welcoming the world to the 2008 Olympics, a massive source of national pride.

China, a veto-wielding permanent member of the U.N. Security Council, buys two-thirds of Sudan's oil exports, sells the African country weapons and military aircraft, and has blocked efforts to send U.N. peacekeeping forces to Darfur without Sudanese consent.

Why does the Chinese placing more value on commerce than human rights surprise anyone? After all, one can't expect the Chinese government to care more about the people of Darfur than about its own citizens... which ain't much.

Bad news for the mullah-ocracy

Iranians burn a gas station and nearby cars during a protest against gas-rationing, in northwest Tehran June 26, 2007. Angry Iranians set fire to a Tehran petrol station and chanted anti-government slogans in a northwest area of the capital on Tuesday in protest against fuel rationing introduced in OPEC's number two oil producer. REUTERS/Raheb Homavandi (IRAN)

Here's an object lesson why socialist programs nominally for the benefit of the poor end up hurting the poor along with everyone else.

TEHRAN, Iran (AP) -- Angry Iranians attacked several gas stations in protest after the government suddenly began long-threatened fuel rationing, while many others rushed to fill their tanks....

The Oil Ministry announced the start of rationing Tuesday night, just three hours before it was due to begin at midnight. Some stations in Tehran had lines more than a half-mile long as drivers tried to get one last fill-up before the limitations kicked in....

"Is this good timing, to announce rationing only three hours before it starts?" complained Ahmad Safai, a 30-year-old shopkeeper who was in line. "I had no gas in my car's tank when I heard the report...."

Hard-line President Mahmoud Ahmadinejad came to power in the 2005 election based largely on his promises to improve the faltering economy. But his failure to do so has sparked widespread criticism.

"This man Ahmadinejad has damaged all things. The timing of the rationing is just one case," said Reza Khorrami, a 27-year-old teacher who was among those lined up at one Tehran gas station before midnight.

Iran is the second-biggest exporter in the Organization of Petroleum Exporting Countries. But because it has low refining capability, it has to import more than 50 percent of its gasoline needs. To keep prices low, the government subsidized gas sales, saddling it with enormous costs.

Under the rationing plan, owners of private cars can buy only 26 gallons of fuel per month at the subsidized price of 38 cents per gallon.

If Iranian drivers are like American drivers (and I bet they are), right about now they're feeling the same love for Ahmadinejad as we used to feel for Jimmy Carter during the 1979 oil crisis (coincidentally caused by another Iranian madman). This could be the beginning of the end for Ahmadinejad's regime.

UPDATE:

It got a little ugly, and it may yet get worse:

Iranians smashed shop windows and set fire to a dozen gas stations in the capital Wednesday, angered by the sudden start of a fuel rationing system that threatens to further increase the unpopularity of President Mahmoud Ahmadinejad.

Police were sent to guard some stations after the violence, and there was calm during the day as motorists lined up to fill their tanks under the new restrictions.