- - Sunday, February 28, 2016

ANALYSIS/OPINION:

The arrival in Israel of a cargo of sweet crude oil from the United States, dispatched from a joint Dutch-Swiss trading company, is the first American overseas shipment since the United States lifted its embargo on oil exports, and it has enormous geopolitical implications. The American shale revolution has cut natural gas and petroleum prices generally around the world, good news for consumers but the fallout is unpredictable.

The United States has become a major source of oil in the world again after a half-century of domination by the Persian Gulf producers. This answers the cry for American energy independence, but the oil of the Middle East has piled up petrodollars in the region beyond the technical and intellectual capacity of governments in the region to invest wisely.

The Saudis, unable to limit production to cripple the American shale-oil producers, are pumping madly not only to cripple the higher cost American shale-oil market but to retain market share. So far technological innovation by the shale producers has met the challenge. More oil is coming on market, some of it from noncompetitive smaller producers induced by politics. With the lifting of sanctions, the mullahs in Tehran hope to return to the ranks of major exporters.

The arrival of American oil is a resolution of what was once Israel’s most dangerous vulnerability, the lack of energy resources. It’s a further link in the U.S.-Israeli alliance, and will strengthen Prime Minister Benjamin Netanyahu’s hand against the state capitalists of both the Israeli left and right who want to forbid exports of newly discovered gas deposits in the Eastern Mediterranean. Mr. Netanyahu needs those exports for political reasons, not least to strengthen the delicate relationship with Turkey. The Turks, once Israel’s only economic and military ally in the region, have drifted away in the wake of President Recep Tayipp Erdogan flirtation with the Islamists. But Israeli natural gas shipments through energy-deficit Turkey, along with transshipment of Central Asian oil and gas to Europe, is one of Turkey’s economic goals.

The American tie will strengthen Israel’s hand in efforts to coordinate recent discoveries of gas off the Egyptian coast by an Italian company. Cyprus is producing natural gas, too. Even before these latest finds, a U.S. Geological Survey report estimated that deposits of 122 trillion cubic feet of natural gas and 1.7 billion barrels of oil lie off the coast of Israel and under the Gaza Strip. (For comparison, the United States consumes 25 million cubic feet of gas annually.) The most recent additions to these massive reserves offer the Europeans an alternative to the high-cost Russian gas imports at the heart of the Russian economy, now jeopardized by sanctions imposed in answer to President Vladimir Putin’s aggression in Ukraine and Syria and threats to the Baltic states.

With domestic gas, access to a neighbor’s reserves, and now the American tie, Israel’s economy and its worldwide stature is rising rapidly despite the insoluble Palestinian problem and the current wave of knifings by radical Islamic terrorists. The strengthening of the U.S.-Israel tie comes as the Obama administration continues to attempt to loosen that American tie to its most reliable ally in the Middle East. Everything waits for Jan. 21, 2017.


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