Yet another Israel offshore natural gas reserve was found the other day, this one at the Leviathan site. Current estimates have it at $45 billion dollars worth of gas (450 billion cubic meters). This on top of the Tamar site discovered at the beginning of the year which was estimated at some 238 cubic meters.
Let’s put aside the tax/royalty fight/discussions between the Israeli government and the drilling companies.
Let’s talk about something far more important.
What should Israel do with all that gas and gas revenue?
Estimates are that Israel has found at least 100 years worth of natural gas at estimated future uses. Unfortunately, there are those already talking about Israel becoming a gas-export state.
That is a bad idea, because the problem is while this seems like a lot of money, it really isn’t.
Israel’s annual GDP in 2009 was around $195 billion dollars. The Saudi’s just spent $60 billion dollars to buy new fighter planes. And of course, it’s not like the lottery, we’re not getting it all in one lump sum, but rather spread out over time.
In short, it’s “found money”, not something that will magically transform our entire economy because it’s not enough to do that immediately, but rather it is something that can be invested over the long term to improve our (and our neighbors) lives over time.
Jameel and I have been discussing this a lot lately, and we’ve come up with a plan.
There 6 areas that we believe can and should directly benefit from the gas finds:
- Electric Grid
- Internet Infrastructure
While we’re not economists around here, here are some important points to consider natural gas sells at around $0.25 per cubic meter (depending where you are and how it gets transported to you, gas for us should probably be much cheaper), desalinated water is sold at around $0.70 per cubic meter.
On a financial level it makes sense to use part of the gas to make fresh water, and then sell the water. It will also significantly cheapen the price of producing water, as I don’t believe it is even close to a 1:1 correspondence between the amounts of gas needed to desalinate water.
If any of our readers are economists, we’d love to hear what you have to say about that.
Israel can invest in more desalination plants, and become a water exporting country, helping our neighbors like Jordan and Egypt. It seems it would be a more profitable export and would help develop peace (based on their needing us - as they need water).
Obviously the Kinneret would be refilled and Israel could even plant water-thirsty agricultural products for export (and local use), not to mention really make the desert bloom.
The Med-Dead plan (not Red-Dead) should be immediately implemented.
2. The Electric Grid
Everything should be electrified. No more gas cars. With electricity aplenty there would be no reason for gas vehicles. And we could shut down/convert the existing polluting electricity generating facilities.
Natural gas isn’t going to last forever. And probably not even the 100 years they are estimating now. These finds give us breathing space.
This money should be used to heavily invest in finding and developing alternative fuel solutions (Joe is currently preferential to bio-fuels).
Furthermore we should start exporting electricity (through our electric grid) and CleanTech to our neighbors.
The air-quality, for instance, in Gush Etzion is poor.
Because Egpyt uses leaded fuel in their electric plants and cars, and Egypt releases a lot of pollution into the atmosphere, where the jet stream then brings all their pollution up to Israel and dumps it down on Gush Etzion.
Helping our neighbor reduce their reliance on polluting technologies will clean up the air for the rest of us.
If you’ve noticed, the first 3 items are environmental. Healing and cleaning up our environment, and finding ways to keep it clean into the future.
But it’s more than just being green.
Israel should become the world leader in CleanTech while teaching and implementing it to countries around the world. There's money in it.
Education should not suddenly become free. Free loses value. Education should still cost, but teachers salaries and the quality of teachers should be significantly improved. The best people should be attracted to teaching.
As a reward and incentive, college education should be free to anyone who completes their army service.
5. Internet Infrastructure
We’d like to see fiber optics right up to the doorstep. Let’s get superfast internet going in Israel. We can think of all the amazing things to do if we had it.
6. The last item is independence from US policy.
$65 billion spread out over a few decades wouldn't cover what the US invests in Israel militarily.
But the question is, does Israel really need that military aid in the first place? We say no.
The money should be used to break Israel from our psychological dependency on US military aid, and if we may dare add, break Israel's addiction to US Jewish donations; not that Jews shouldn't donate to Israel to strengthen their connection to Israel and the Jewish people, but so that Israel should be able to implement policy based on the opinions of people who live here, work here, and serve here, and not out of dependency on the opinions and policies of donors.
Once freed of US strings, Israel will be in a better position to sell and develop our other technologies (wisely) with partners of our own choosing.
The point we’re trying to make with this post is that the gas money isn’t some panacea. It’s a gift that if we invest it wisely we’ll be able to extract from it tremendous long term value.
Where and how do you think Israel should be investing our future gas money?
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