Let There Be (Natural) Gas – Israel’s First Gas Starts Flowing

You are not reading about a new interpretation of Genesis creation story. The title is a pun on news of gas starting to flow into Israel’s electric company from Delek’s Tamar gas field. It should be the biggest story on the news, but barely got a mention in the press. Did Israelis stop caring about energy cost? I don’t think so. It’s simply old news here. When natural gas was discovered two years ago it was big news. The media found all kind of commentators predicting the great Israeli energy empire (a few comparison to our Arab neighboring states were buzzing around.) Then came the two years of building terminals and pipeline. So now, this old news has turned into “it’s about time”.

At first, the new gas source will not reduce electric and gas prices to Israeli consumers. There is a planned 4% to 6% electric rate increase (this month) which may be reduced to 2% to 4%. Yet as the gas continues to flow in the future, electric rates to most private and commercial customers should not increase as much as market gas prices. This alone will assure Israel’s better than average economic strength. Once Israel becomes completely gas independent, more savings in actual gas rates will also help the state economically. As of now, the gas source is estimated to increase Israel’s GDP by 1%. This may not sound like much, yet over time, will reduce inflation by this 1% every year, or even turn into real economic growth (GDP). But to the average Israeli citizen, this does not bring much excitement. Here, a 1% change in anything seems trivial. Economic ups and downs make better news when Intel has a good year or a small start-up gets bough (or rumors of being bought like Waze by Apple). The relentless buzz and hype in Israeli media makes for a tough audience. News has to be big and exciting to get on the front pages and get noticed. We will keep an eye on the gas flow from Israel’s sea exploration and see how it affects the Israeli economy and the average citizen’s opinion on the street.