Natural gas discovery: 2010’s most underestimated story

The New York Times reports good news for Israel:

Exploratory drilling off Israel’s northern coast this week has confirmed the existence of a major natural gas field — one of the world’s largest offshore gas finds of the past decade…

As I wrote in the past, this story has not garnered the attention it merits. The natural gas find could finance a huge improvement in public services, which have been seriously underfunded in recent years, with disastrous consequences. Alternatively, it could make the wealthiest people in Israel – already one of the Western world’s most unequal nations – even richer.

The Newspaper of Record describes how “the find has been accompanied by a heated debate over how much in taxes and royalties Israel will charge.” A “debate” indeed. In favor of a higher share for the state, you have every Israeli group advocating for social justice, plus the famous socialists from the IMF, the OECD, Israel’s Treasury Ministry and the governor of the Bank of Israel, Stanley Fischer. On the other side, you have, well, the natural gas tycoons themselves.

What the NYT does not report, is that these tycoons have recently been boosted by a nasty nationalist scare-mongering campaign. MK Ofir Akounis (Likud), chair of the Economics Committee, bizarrely implied [Heb] that the New Israel Fund (a non-profit that channels funds from abroad to a variety of Israeli social and human rights organizations) wants to increase the royalties, so that foreign investors would be driven away to Lebanon, thus strengthening Hizbullah. Others have pointed to Iran as the benefactor of the Bank of Israel’s largesse.

This should be a no-brainer. A public commission, headed by a respected economist, will soon recommend increasing the taxes on natural gas profits. Note, that the taxes will be levied on profits, not income, so there is no risk that gas production will become economically unviable, only less exorbitantly profitable. And it would only bring Israel in line with other Western countries, in terms of royalties and taxes on natural resources. Right now, it ranks at the very bottom.

With natural gas lobbyists using every dirty trick in the book, and appealing to Israelis’ worst instincts, you never know. Let’s hope 2011 is a year in which good sense and basic decency prevails, on this issue as well as others.