July 16, 2012

Israel's Oil Weapon

By Gene Schwimmer
Seemingly out of nowhere, geopolitics have been all but turned upside down in
the Middle East, thanks to the discovery of massive energy resources in Israeli
territory. As a nascent Oil Power, the Jewish State is only beginning to
contemplate the new dynamics of influence available to it.
The world knows Vladimir Putin as President of Russia; however, to Putin's official
title, allow me to suggest a second appellation, unofficial, but no less descriptive:
Israel's New Best Friend. Until recently, one could characterize Russia's position
vis--vis Israel as, at best ambivalent: cordial relations with Jerusalem on the one
hand, while supplying weapons, nuclear technology and other assistance to her
enemies on the other.
But Putin's late June visit to Israel signaled, and was meant to signal, a seachange in Russia-Israel relations -- "sea" as in Mediterranean sea, where in 2009,
50 miles off the Israeli coast, geologists discovered "an estimated 8.3 tcf (trillion
cubic feet) of highest-quality natural gas," to be surpassed just a year later with
the discovery of a second field, named Leviathan, of an additional 16 tcf, "making
it the world's biggest deep-water gas find in a decade" and causing Israel to go
from "a gas famine to feast in a matter of months." Other estimates put the
Leviathan reserves as high as 20 tcf.
Needless to say, these discoveries could not be more timely, coming at about the
same time as the Muslim Brotherhood's ascension to power and acts of sabotage
in Egypt jeopardize the reliability of natural gas supplies to Israel from that
country. Who says that God does not retain a special place in his heart for His
Chosen People?
But of more earthly, and material, concern than the Almighty's mysterious
affection for an ancient tribe of itinerant sheepherders, is Russian energy giant
Gazprom's love of lucrative gas extraction contracts with the Jewish state. After
all, oil and gas discoveries of such magnitude are about as rare as the sight of
Vladimir Putin, praying at the Western, wall in a yarmulke. Or taking the
Palestinians' side against the Israelis' as energetically in the future as he has in
the past. For, as Jerusalem Post columnist Isi Leibler notes, while Putin "heads a
country which has ties and provides weapons to some of [Israel's] greatest
enemies including Iran and Syria" and "tends to support the Palestinian position,
both as a member of the Quartet and at the UN",
[Putin's] visit to Israel unquestionably sends clear signals. Even recognizing
major divergence of policies in relation to Iran and Syria, and that Putin's tensions
with the United States and interests in the Arab world preclude [Israel] from
considering him a partner, it sends a message to the Arabs that Russia is not an
enthusiastic ally in their efforts to undermine the Jewish state.

Or at least not while the rubles are flowing into Gazprom's coffers, anyway. But
it's not just the Benjamins (Netanyahu or $100 bills, take your pick). Both
countries share ambivalent and sometimes strained relations with Turkey;
concerns about the dark side of the Arab Spring, the rise of the Muslim
Brotherhood and Islamic fundamentalism; and concerns about events in Syria.
Some of Israel's European critics might also want to rethink their anti-Israel
stances and the barely disguised anti-Semitism that inspires them, or at least
tone it down a bit should they want, at some future time, a piece of the Israeli oilpie. As Victor Davis Hansen asks, "Will Europe still snub Israel when it has as
much oil, gas, and money as an OPEC member in the Persian Gulf?" Well, I'm
pretty sure they'll want to, but as De Gaulle famously said, "France has no
friends, only interests." I suppose we'll find out soon enough whether France has
no enemies, either. In the meantime, Walter Russell Mead simply states the
obvious when he says that "
regardless of the simple economic impact, in different ways and different degrees
the Gulf countries and Russia are going to lose a lot of the political advantages
that their energy wealth now gives them. They will have less ability to restrict
supply and to manipulate prices than they have had in the past. Oil and gas are
going to be less special when supplies are more abundant and more broadly
distributed.
To which this writer would only add: especially when a major source of these
"more abundant and broadly distributed" supplies is a stable, democratic friend
and ally.
And finally there is America. For Russia, it's the traditional East-West rivalry. But
for Israel, it is not so much America the country as it is her current, and hapless,
president, Barack Obama and the Israel-hostile fellow travelers who populate his
administration. For the first time since, perhaps, the Eisenhower administration,
Israel has good reason, at least while Obama is in power, to question our
reliability as an ally. And Putin has an obvious incentive to exploit Jerusalem's
doubts by moving closer to Israel in the hope of creating a concomitant distance
between Israel and the U.S. Indeed, he may already be doing so (emphases
below mine):
Putin's arrival in the region must be viewed in contrast to President Obama, who
has yet to visit Israel.... President Putin's visit was clearly calculated to be
the mirror image of Obama's last visit to the region. In a similar manner,
while Obama chose to talk to Palestinian Authority President Mahmoud Abbas in
his first overseas telephone call as president, Putin and Israeli Prime Minister
Netanyahu spoke on the phone immediately after Putin's return to the presidency
in May. [...]
What's more, not only did Putin begin his tour of the Middle East in Israel, he also
made a point in visiting holy Christian and Jewish sites, while entirely skipping
the Muslim shrines. He met with Christian and Jewish religious leaders but
avoided meeting any Muslim clergy. Even when visiting the Palestinian

Authority, Putin chose to come to Bethlehem -- a Christian site -- rather than

Ramallah. Whereas Obama chose to reach out to Islam and the
Palestinians during his famous 2009 speech in Cairo, Putin chose to
appear as the defender of Christianity in the Middle East, outreaching to
Judaism and playing down the Palestinian case. [...]
Indeed, when [Putin] insisted on negotiations instead of unilateral steps as the
right path towards the resolution of the [Israeli-Palestinian] conflict, he
practically endorsed Israel's stance on the matter.
I mention the above as a cautionary note. Israel has a lot more than oil to offer
Russia -- and China, and India -- than oil. She also has brainpower and all the
technological prowess that goes along with it, and here I mean, especially,
military technology, which, I think we all can agree, our competitors and enemies
would very much like to have. What Israel does not have a lot of, is money. But
Russia, India and, especially, China, have oodles of the stuff, much of it formerly
ours. And I would not count the Israelis themselves out, either: as more and
more Israeli energy exporting infrastructure comes online, and the revenues start
flowing in, Israel might, one day, have substantial funds of her own to put in the
pot. Yes, Israel loves us -- but do they love us enough to commit national suicide
for us? Israel is a tiny country, surrounded by enemies both potential and real,
and like any country in such a situation, relies on alliances and partnerships with
larger ones. Which country, or countries, one allies with, however, is of
considerably lesser importance when survival is the issue and let's be brutally
honest, here. If you were Benjamin Netanyahu, and Barack Obama were your
ally, would you want to put all of your alliance eggs in one basket?
So as he continues to lambaste Israel on the one hand, while schmoozing Israel's
rivals and enemies on the other, and assuming that an Israeli-designed antimissile missile could shoot down an American missile as well as it can an Arab -or Chinese, or Russian -- one, President Obama might wish to ponder the
geopolitical implications of the day, if it ever comes, that the Israelis decide that
they don't need us anymore.
But we were talking about oil, about how the new Israeli discoveries make Israel,
for the first time in her history, both energy-independent and an increasingly
desirable ally and partner for any number of rich, powerful and above all, energyhungry, countries. So let's look at the military implications of Israel's emergence
as an "energy superpower" and how her energy independence can benefit not
just her, but us, too.
Many of us older folks remember well the Arab oil embargo of 1973, Sheik
Yamani, a sweater-clad Jimmy Carter turning down the thermostat in the White
House and, above all, the breathless anticipation with which the world would
await the result of each price-setting meeting of the then-all powerful (or at least
so it seemed) Arab oil cartel. Fortunately, we haven't heard from the cartel in a
while and with an oil-rich Israel more than happy to help her Western friends -and hurt her Arab (and Venezuelan) enemies -- by ramping up her own

production to offset any lost production from production reductions elsewhere, we

may never hear from them again.
But of course, any introduction of new supply will push oil prices down
everywhere and reduce revenues for everyone. Including, of course, Iran. So if
you're Israel, with an enemy as implacable -- and oil-revenue dependent -- as
Iran, why wait for an embargo? Why not flood the world with as much oil, as fast,
and as cheaply, you can? Need oil, mister? Oy, have I got a deal for you....
And finally, regarding Iran, there is the military application: Iran's nuclear
facilities are hidden deep underground, but her oilfields are not. Most, if not all,
of Iran's oil production infrastructure is above ground, vulnerable to attack and,
oh, by the way, oil is extremely flammable. By impairing Iran's oilfields, which
the Israeli air force probably could do, Israel could bring the Iranian economy, and
the Mullahs who rule it, to its and their knees. Indeed, one can only assume that
the only reason the Israelis haven't already done so is the predicted effect on oil
prices and the predictable cries of outrage from the "international community"
guaranteed to arise therefrom. But with Israel ready, willing and able to replace
any lost Iranian oil in quantities sufficient to keep world oil prices stable or even
lower...?
Since the destruction of the First Temple by the Babylonians in 586 B.C., through
centuries of conquest, revolt and exile, Jews have dreamed of -- and fought for,
and died for -- the day when a restored, militarily strong, truly independent Israel
would rise and resume her rightful place among the nations of the world.
With Israel's newfound energy supplies, and the will and wisdom to exploit those
supplies to her advantage, that day may not be far off.

Read more:
http://www.americanthinker.com/2012/07/israels_oil_weapon.html#ixzz2L3GfLbE
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Wednesday, July 11, 2012 - The Tygrrrr Express by Eric Golub

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LOS ANGELES, July 12, 2012 Every once in awhile an event comes along that
cannot be overstated. No hype is too much. Every bit of hyperbole is deserved.
Every cliche is acceptable.
On July 2nd, 2012, an article describing such an event slipped under the radar.
Using the caveat "if true," then a world-altering, game-changer has just taken
place. Life as we know it on Earth could change. The balance of world power may
be shifting.
Apparently, Israel has oil.
Let that sink in. Israel...has...oil.
Holy Beverly Hillbillies, Jed Clampett. Sweet mother of Texas tea, J.R. Ewing.
Say it again, repeatedly. Spell out every letter. I-S-R-A-E-L...H-A-S...O-I-L.
Walter Russell Mead of "American Interest" broke the story, and every word of his
column must be read carefully.
The numbers are staggering.
"Israel may have the third largest shale oil reserves in the world: something like
250 billion barrels. (The US is believed to have the equivalent of well over 1
trillion barrels of potentially recoverable shale, with China having perhaps one
third of that amount. Canada may contain the equivalent of 2 trillion of barrels
conventional oil, more than Saudi Arabia, Iraq and Iran combined.)"
Shale oil is not as easily recoverable as conventional oil, but because Israel has
so much of it, it is still economically worth it to extract and recover it.

Israel has more than oil. They have natural gas. Lots of it.
"Drillers working in Israeli waters have already identified what look to be 5 billion
barrels of recoverable oil in addition to over a trillion cubic feet of gas. Israels
undersea gas reserves are currently estimated at about 16 trillion cubic feet and
new fields continue to be rapidly found."
Not millions. Not billions. Trillions. Trillions of cubic feet of natural gas.
For those who want evidence, turn to Russia. Russian President Vladimir Putin has
already flown to Israel and prayed at the Western Wall. He did everything but
dance and sing Hava Negilah. His remarks were so pro-Jewish that Arab groups in
the Middle East immediately moved up their weekly rage explosions by an entire
day.
Mr. Putin does not do business with anybody unless it benefits Mother Russia. He
does not normally praise a Western religion while maintaining control over the
largest atheist nation. He has already begun cooperation between Russia and
Israel. This oil boom is real.
This could end the regimes in Iran and Syria without firing an external shot. OPEC
could be nothing more than a trivia answer to the question of who Donald Trump
despises more than Rosie O'Donnell.
Israel is already cooperating with Canada while America snubs two of their
greatest allies. Israeli and Canadian Prime Ministers Benjamin Netanyahu and
Stephen Harper have completely bypassed President Obama. Even Mr. Obama's
energy-killing EPA cannot stop this. What North Dakota is doing for America,
Israel may now do for the world.
A true potential victory over global terrorism. Honest oil markets. Prices based on
value.
The land of milk and honey may become the land of petroleum wealth. The
miracle of the orange groves may now be the miracle of natural gas.
Radical Islam may have just seen its future death, with zero power to stop it.
The world is now a better place.
Israel has oil.

Read more: http://communities.washingtontimes.com/neighborhood/tygrrrrexpress/2012/jul/11/israel-has-oil/#ixzz2L3GuOmEL

Follow us: @wtcommunities on Twitter

Israels Emergence As Energy Superpower Making Waves

Walter Russell Mead

Israeli Prime Minister Golda Meir famously lamented that Moses led the children
of Israel for forty years of wandering in the desert until he found the only place in
the Middle East where there wasnt any oil.
But could Moses have been smarter than believed? Apparently the Canadians
and the Russians think so, as both countries are moving to step up energy
relations with a tiny nation whose total energy reserves some experts now think
could rival or even surpass the fabled oil wealth of Saudi Arabia.
Actual production is still minuscule, but evidence is accumulating that the
Promised Land, from a natural resource point of view, could be an El Dorado: inch
for inch the most valuable and energy rich country anywhere in the world. If this
turns out to be true, a lot of things are going to change, and some of those
changes are already underway.
Israel and Canada have just signed an agreement to cooperate on the exploration
and development of what, apparently, could be vast shale oil reserves beneath
the Jewish state.
The prospect of huge oil reserves in Israel comes on top of the recent news about
large natural gas discoveries off the coast that have been increasingly attracting
attention and investor interest. The apparent gas riches have also been attracting
international trouble. Lebanon disputes the undersea boundary with Israel (an act
somewhat complicated by the fact that Lebanon has never actually recognized
Israels existence), and overlapping claims from Turkey and Greece themselves
plus both Greek and Turkish authorities on Cyprus further complicate matters. Yet
despite these tensions, following Russian President Vladimir Putins surprisingly
cordial visit last week, Gazprom and Israel have announced plans to cooperate on
gas extraction.
This suggests at a minimum that Turkish efforts to block gas development in the
region will face opposition from Russia as well as from Israel. Gazprom and other
Russian companies are also likely to do well in any gas exploration deals

developed with the strongly pro-Moscow (and very cash hungry) Greek Cypriot
government.
The stakes are not small: the offshore Levantine Basin (which Syria, Lebanon,
Turkey, Greece, Cyprus, Israel and even Gaza will all have some claim to) is
believed to have 120 trillion cubic feet of natural gas and considerable oil.
Drillers working in Israeli waters have already identified what look to be 5 billion
barrels of recoverable oil in addition to over a trillion cubic feet of gas. (US firms
were involved in these finds.) Israels undersea gas reserves are currently
estimated at about 16 trillion cubic feet and new fields continue to be rapidly
found.
The new Israeli-Russian agreement is part of a conscious strategy by the Israeli
government to use its nascent energy wealth to improve its embattled political
position. With Italy reeling under the impact of big wrong-way bets on Iran, Rome
may also begin to appreciate the value of good ties with a closer and more
dependable neighbor. Another sensible target for Israeli energy diplomacy would
be India: the two countries are already close in a number of ways, including trade
and military technology, and India is eager to diversify its energy sources.
Gas is one thing, but potential for huge shale oil reserves under Israel itself,
however, is a new twist. According to the World Energy Council, a leading global
energy forum with organizations and affiliates in some 93 countries, Israel may
have the third largest shale oil reserves in the world: something like 250 billion
barrels. (The US and China are both believed to have larger shale oil reserves,
with the US believed to have the equivalent of well over 1 trillion barrels of
potentially recoverable shale and China having perhaps one third of that amount.
Canadas Athabaskan oil sands reserves may contain the equivalent of 2 trillion
of barrels conventional oil, or more than all the conventional oil known to exist in
Saudi Arabia, Iraq and Iran combined.) If the estimates of Israeli shale oil are
correct, Israels gas and shale reserves put its total energy reserves in the Saudi
class, though Israels energy costs more to extract.
Many obstacles exist and in a best case scenario some time must pass before the
full consequences of the worlds new energy geography make themselves felt,
but if production from the new sources in Israel and elsewhere develops, world
politics will change. The countries along both coasts of the Persian Gulf erupted
into global prominence in the 1970s when world energy shortages catapulted
them into previously undreamt of wealth and political influence. Those countries
will still be rich; for the most part, their energy is cheaper to produce than the
more unconventional sources in the rest of the world, including Israel.
But what they keep in money they may lose in clout. OPECs power to dictate
world prices is likely to decline as Canadian, US, Israeli and Chinese resources
come on line. In fact, the Gulfs most powerful oil weapon going forward may be
the ability of those countries to under-price rivals; expensive shale oil isnt going
to be very profitable if OPEC steps up production of its cheap stuff. (Brutal, dogeat-dog price wars driving oil prices down to derisory levels: Via Meadia trembles
at the thought.)

Nonetheless, the ability of the Arab governments to influence political opinion in

Europe and the rest of the world is likely to decline as more oil and gas resources
appear and as Israel emerges as an important supplier. We could be heading
toward a time when the world just doesnt care all that much what happens
around the Persian Gulf as long as nobody gets frisky with the nukes.
Another big loser could be Turkey. For years the Kemalist, secular rulers of Turkey
worked closely with Israel, and the relationship benefited both sides. Under the
Islamist AK party, that relationship gradually deteriorated. Both sides were at
fault: Turkish politicians were all too ready to demagogue the issue to score
domestic political points, and Israelis did not respond with all possible tact.
But if Israel really does emerge as a great energy power, and a Russia-GreeceCyprus-Israel energy consortium does in fact emerge, Turkey will feel like
someone who jilted a faithful longtime girlfriend the week before she won a huge
lottery jackpot. More, Turkeys ambitions to play a larger role in the old Ottoman
stomping ground of the eastern Mediterranean basin will have suffered a
significant check.
If the possibility of huge Israeli energy discoveries really pans out, and if the
technical and resource problems connected with them can actually be solved, the
US-Israeli relationship will also change. Some of this may already be happening.
Prime Minister Netanyahus evident lack of worry when it comes to crossing
President Obama may reflect his belief that Israel has some new cards to play. An
energy-rich Israel with a lot of friends and suitors is going to be less dependent
on the US than it has been and it is also going to be a more valuable ally.
The emerging new energy picture in Israel has the potential to be one of the
biggest news developments of the next ten years. Potentially, the energy
revolution and the change in Israels outlook has more geopolitical implications
than the Arab Spring. Via Meadia will be following this story and trying to make
sense of the geopolitical and economic shifts as they occur.
Even at this very early stage, the impact of Israels energy wealth is dramatic. On
President Putins visit to Jerusalem, he donned a kippah and went to pray at the
Western Wall of the ancient Temple. As one press report has it, at the close of his
visit, Putin turned to one of the Russian Jews present and said
I came here to pray that the Temple should be rebuilt, and I wish that your
prayers will be fulfilled.
Putin had more honeyed words for his Israeli hosts. Touring the Wall, he said
Here, we see how the Jewish past is etched into the stones of Jerusalem. This is
not quite a formal recognition of Israeli claims to the Old City, but it is much more
than Israelis usually hear. (Many Arabs and Palestinians insist that there is no
connection between the Jews and the Western Wall, known in Arabic as the Al
Buraq Wall after the mysterious heavenly steed said to have brought the Prophet
Mohammed to Jerusalem on his famous Night Journey.)

The reaction from the Arab side to Putins statement about the historically Jewish
character of Jerusalem was correspondingly furious. The Al Aqsa Institute issued
the following statement:
We tell Putin and people like him that the Al-Buraq Wall is exclusive Muslim Waqf
property, is an inseparable part of the blessed Al Aqsa Mosque and non-Muslims
have no rights at this wall or at the blessed Al Aqsa Mosque, and all historic facts
and international documents stress the fact that the Al Buraq Wall is Islamic
We stress that every stone in the Al Aqsa Mosque and its buildings shows is
evidence that it is Islamic and every stone in Al Quds is testimony to Al Qudss
Muslim and Arabic nature.
If the oil and the gas start to flow in anything like the quantities experts think
now may be possible, expect many more visitors to Jerusalem to say similar
things to Israelis and the Al Aqsa Institute will have to issue a lot more angry
rebuttals. An Israel with vast energy endowments may be less coolly received in
certain circles than it is today.
In the meantime, we wonder if there was an 11th, hitherto undiscovered
commandment on those tablets at Sinai: Thou shalt drill, baby, thou shalt drill.
Photo courtesy Shutterstock.
Posted in Essays, Israel & Palestine, Middle East
1679

71

623

58 Responses to Israels Emergence As Energy Superpower Making

Waves
1. Luke Lea says:
July 2, 2012 at 10:56 am
Good news. From past reading I am led to understand that the costs of production
make oil shale inherently risky because it requires vast amounts of capital. Since
conventional oil from wells is much cheaper to produce there is always the
danger that the big producers in the Middle East will force prices down below the
break even point.
OTH, natural gas might turn out to be as cheap if not cheaper than Middle East
oil. What I am getting at is the possibility of import taxes on oil coming out of
countries which do not honor the norms of Western civilization human and civil
rights, the rule of law, democratic institutions in particular. We could reduce the
amount of disposable income these regimes have to do mischief around the
world, whether it be nuclear proliferation of the finance of Islamicist intolerance.
A sticking point is that China might not participate. Indeed, given Chinas
violation of these very norms, they almost certainly would not cooperate. But
then that is just an argument for punishing Chinese exports with tariffs too.

What I am arguing for is the West using its economic muscle to foster Western
civilization, which I think we need to reclaim as the only possible basis for a true
world civilization based on principles of reason, justice, equality, liberty, human
and civil rights, and the rule of law. Anything less is barbarism.
I know this goes against the current consensus of multiculturalism and pluralism.
But, based on a lifetime of experience, I have come to the conclusion liberal
that I am that these are just covers for compromise with barbarism in its
various forms, whether in China, Africa, or South Asia. Political correctness stands
in the way, but political correctness is really thought control with origins in
Marxist-Leninist-Maoist totalitarianism and extreme leftism. We forget how
intellectually influential that tradition used to be in the West, back in our naive
days. Its influence continues and it threatens our civilization in my considered,
humble, but well-educated opinion.
2. Ed Snyder says:
July 2, 2012 at 12:07 pm
This is wonderful news!
3. John Barker says:
July 2, 2012 at 12:21 pm
I am gland to learn that Mr.Putin has found faith. God works in mysterious ways.
4. Jacksonian Libertarian says:
July 2, 2012 at 12:30 pm
Both sides were at fault: Turkish politicians were all too ready to demagogue the
issue to score domestic political points, and Israelis did not respond with all
possible tact.
Since Israel is embattled on all sides, if tact was going to protect the relationship,
they would have used it. The fact is the Islamists were never going to continue
the Kemalist relationship, and their dreams of Ottoman level influence required
making Israel an enemy.
Prime Minister Netanyahus evident lack of worry when it comes to crossing
President Obama may reflect his belief that Israel has some new cards to play.
No way, this was about Obamas weakness. Take a look around, everyone in the
world is ignoring Obama, he just isnt a threat. He fails at everything, if you just
ignore him he will fail again. The worlds leaders see him as a Kowtowing Pussy
and they are not afraid.
5. Mrs. Davis says:
July 2, 2012 at 12:46 pm

The lower cost to lift Arab oil merely means they will run out of it before we run
out of our higher cost shale oil. Peak Arab oil will happen. Encouraging Chinese oil
utilization today will hasten the westernization of both cultures.
6. Tom Holsinger says:
July 2, 2012 at 1:51 pm
typo here change shale gas to shale oil:
Gas is one thing, but potential for huge shale gas reserves under Israel itself,
however, is a new twist.
7. Jim. says:
July 2, 2012 at 2:35 pm
This is remarkably providential, coming as it does as countries decide whether
their energy portfolio depends on Iranian oil.
By the way, for those of us who enjoy neither unlimited free time nor the services
of interns, could you provide a more specific link to the World Energy Councils
report on the new Israeli shale finds? News this big deserves some follow-up.
8. Fred says:
July 2, 2012 at 5:38 pm
Its nice to see oil in the hands of civilized people. Anything that can help a)lower
the price of oil hence reduce the flow of money to people who wish us ill and
b)provide a source of supply other than from people who wish us ill is a good
thing.
9. Eliyahu says:
July 2, 2012 at 5:40 pm
encouraging stuff, Walter. What I dont understand is why the EU has not helped
Greece develop its undersea oil. As you know, Turkish threats and naval
intervention have retarded Greek oil & gas extraction in Greeces maritime
economic zone. Why didnt the EU stand up to Turkey on this matter which, if
Greece could have developed its oil & gas, would have made it another source of
hydrocarbon energy for the EU within the EU itself? That would also have made
Greece a more solvent country which the Eurozone claims to want to foster.
Instead of worrying about Greek debt, development of Greeces undersea
resources would have made it an asset to the Eurozone and the whole EU.
10.Bob N says:
July 2, 2012 at 5:55 pm
Not all shale deposits have the same yield per square mile and some of Israels
deposits are offshore, but these numbers seem overstated. The Bakken formation

is 200,000 square miles and Israels area is 8000 square miles. The highest
estimate for Bakken is 24 billion barrels. So with 96% less area, Israel may have
10 times as much oil? It would be great, but Ill wait for more data. Also, these
finds dont always pan out. Exxon-Mobil just pulled out of shale development in
Poland.
11.RJSUSA says:
July 2, 2012 at 7:41 pm
Wow file this one under Good News!! This would be amazing if it pans out. Only
thing better I can think of would be that the world stops funding the Arabs in
Judea, Samaria and East Jerusalem and theyre forced to emigrate!
12.Kris says:
July 2, 2012 at 7:51 pm
As per Bob@10, Im adopting a wait-and-see attitude. Or rather, wait-andcomment. Onwards!
Ah! So now we discover the reason for the location of the Western colonialist
enterprise known as Israel! Though given recent developments, I wouldnt be
surprised to discover that this entire planet is one huge shale oil deposit.
Gazprom and Israel have announced plans to cooperate on gas extraction.
Turkey let loose very bellicose words regarding Israeli/Cypriot extraction plans.
Gazproms involvement ensures that these words will remain just that.
Many Arabs and Palestinians insist that there is no connection between the Jews
and the Western Wall, known in Arabic as the Al Buraq Wall after the mysterious
heavenly steed said to have brought the Prophet Mohammed to Jerusalem on his
famous Night Journey.
Twas indeed a mysterious steed; I still havent figured out why it brought His
PBUHness to this particular location which has absolutely nothing to do with Jews
or their mythical Temple.
But as is unfortunately (or not) all too common in that area, the Jews get on with
it, while too many Muslims such as the Al Aqsa Institute specialize in heated
rhetoric.
Thou shalt drill, baby, thou shalt drill.
Smite that rock!
13.memomachine says:
July 2, 2012 at 8:45 pm

Under the Islamist AK party, that relationship gradually deteriorated. Both sides
were at fault: Turkish politicians were all too ready to demagogue the issue to
score domestic political points, and Israelis did not respond with all possible tact.
You are kidding me right? tact?? Is that how you would describe the jihadist
flotilla?
14.Golda says:
July 3, 2012 at 12:42 am
We here in Israel have a great natural resource brain power. Despite a poor
educational system and not enough government
funding for research and higher ed, our high-tech sector is second only to
America. The world will eventually need to move to clean sources of energy that
dont contribute to global climate change and the sooner the better. I hope we
will be a major contirbuter to that effort
15.thibaud says:
July 3, 2012 at 1:16 am
Lets hope it works out. From our lips to G-ds ears, as they used to say.
But some of us who had similar hopes for the Poles are going to temper our
enthusiasm until the reserves are proven.
http://blogs.ft.com/beyond-brics/2012/06/18/poland-shale-exxonexit/#axzz1zX8jV07R
Poland shale: Exxon exit
June 18, 2012
There have been no demonstrated sustained commercial hydrocarbon flow
rates in two test wells in eastern Poland, said an ExxonMobil spokesman, in a
statement issued over the weekend which said the US energy major had
completed its exploration operations in Poland.
The doubters point to the rapidly shrinking estimates for Polands shale gas
deposits as geologists get a firmer grasp of exactly what may lie several
kilometres below Polands flat green fields.
Just a year ago, the Polish government was brimming with enthusiasm over the
prospect of the country becoming a new Norway after the US Energy Information
Administration said Poland might have 5.3tn cubic metres of shale gas the
largest reserves in Europe.
Then, earlier this year, the Polish governments geological institute used newer
data to come up with an estimate of reserves of 346-768bn cubic metres, only
about 10 per cent of the earlier guess.

In its two test wells, ExxonMobil found little of interest. Drilling by other firms
has also been inconclusive finding gas but with flow rates that left investors
disappointed.
16.Randy says:
July 3, 2012 at 8:45 am
Dr. M,
It gets even better. The moonbat is losing his faith. But you knew that.
http://www.guardian.co.uk/commentisfree/2012/jul/02/peak-oil-we-we-wrong
17.WigWag says:
July 3, 2012 at 9:24 am
As a big supporter of Israel (I lived in Beersheba for a brief period), I hate to rain
on this parade; but there is a counterargument to be made.
As much as I dont like Tom Friedman, hes made an interesting point when it
comes to energy resources and development. Hes suggested that the more oil a
nation has, the more primitive its economy. What hes suggested is that oil
wealth might actually hinder economic development.
Friedman cites numerous examples from Iran and Saudi Arabia to Russia and
Venezuela. Each of these four nations are blessed with some of the greatest
energy wealth beneath their sovereign territory of any nations on earth yet Israel,
a nation that until recently had no energy wealth, has a per capita GDP that
exceeds all of them.
In fact, without extracting any energy, this year, for the first time, Israels percapita GDP will exceed the per-capita GDP of the European Union as a whole. In
2010 Israels per capita GDP was almost double that of Russia; it was more than
double that of Iran and Venezuela and it was 25 percent greater than that of
Saudi Arabia.
Friedmans thesis may not be right; but it is at least worth contemplating whether
Israel would have developed the high tech economy that it has had it discovered
its energy resources earlier in its history. It is also worth contemplating whether
Israels trajectory of economic growth might be altered in potentially negative
ways by the discovery of oil and gas.
Many nations with oil and gas wealth handle these resources in a more than
adequate manner; the United States, Canada and Norway come to mind.
My only point is that Israels discovery of energy resources might be a doubleedged sword that has drawbacks as well as advantages.
18.Kris says:

July 3, 2012 at 10:34 am

WigWag@17:
It does you credit to credit Friedman, but hes hardly the originator of this thesis.
(I was reminded of this quote from one of the founders of OPEC: Ten years from
now, twenty years from now, you will see: oil will bring us ruin Oil is the Devils
excrement.)
Regarding Israels per-capita GDP, it is even more astonishing given its
substantial unproductive population and its off-the-books sector (Ultra-Orthodox
and Arabs).
I agree that Israels economic trajectory would likely have been different;
remember that for its first decades, Israel was a somewhat socialistic country.
IF it were to come into carbon-wealth now? From Fiddler on the Roof:
Perchik: Money is the worlds curse.
Tevye: May the Lord smite me with it. And may I never recover.
19.WigWag says:
July 3, 2012 at 11:01 am
Regarding Israels per-capita GDP, it is even more astonishing given its
substantial unproductive population and its off-the-books sector (Ultra-Orthodox
and Arabs). (Kris)
That is a very good point, although its probably only fair to point out that Israels
Arab population probably contributes more to Israels GDP than the Ultra
Orthodox do.
20.thibaud says:
July 3, 2012 at 1:19 pm
Wig good points about the oil curse, but fwiw, I think those nations that had
strong democracies and traditions of effective governance such as Norway and
Canada prior to discovery of their oil windfalls have managed to avoid the
curse.
Id guess that Israel, having strong democratic traditions and reasonably effective
governance, could avoid the curse. Also, as technology development is the
handmaiden of military advancement, Id expect that the IDF would have
incubated nearly as many entrepreneurs even if there had been an Israeli version
of Gazprom or Pemex.
OTOH, the high degree of corruption in Israeli politics would seem to make oil
wealth into a tar baby, as it were.
21.valwayne says:

July 3, 2012 at 4:44 pm

I suppose Israel is dealing with Russia instead of U.S. companies because of
Obamas open hostility to Israel. Another success of The Amateur!
22.Bill says:
July 3, 2012 at 5:14 pm
This may never materialize, but it is worth thinking through. Some things worth
speculating on:
1. Can Israel end the conflict with the Palestinians by just buying them out the
way that other countries have made substantial land purchases? Sure the
Palestinians would try to drive the price above fair market value based on current
use, but they do need the money.
2. The emergence of green anti-Semitism. When Israel becomes an oil exporter,
watch the ethnic caricatures fly.
3. A last ditch Arab regional attempt to seize resources they cannot buy.
4. Utilization of proceeds. Will tax revenues be placed in the types of trusts that
Norway and Canada have or will some of the smaller parties find the feed trough?
23.Ted James says:
July 3, 2012 at 5:23 pm
In regards to post #1, well done. You covered a lot of ground but the point I like
the most is placing tariffs on OPEC oil to protect shale oil producers in liberal
countries.
In regards to post #17, the logic employed by Mr. Friedman seems flawed but you
recognize that. I dont think Israel will devolve into a autocratic regime because
of their new found wealth. However there may be second and third order of
consequences they suffer because of it. Im sure the anti-semites in the region
will use this to feed their hatred. That may in turn hasten a conflict between
Israel and its neighbors, especially if the region unites as a caliphate. Then the
disputed claims that one country has with Israel can be used as additional
reasoning to attack Israel under one flag from many directions (Irans
Hamas/Hezbollah from North and East, Muslim Bros from the South and East if
they take Eygpt, which is likely, and if they take Syria, which is possible).
This confrontation is probably inevitable, which makes it imperative that Israel
develop these resources because of the new friends they will gain because of
them. The Indians seem like natural beneficiaries for Israeli energy. The
Europeans would change their tune on Israel if they could rely upon Israeli energy
instead of having to rely upon Russia and OPEC.
Also, getting the Russians on board is a smart move by the Israelis. The Russians
exert control over their neighbors and sell them most of their military assets. In a

conflict with Israel, the hypothetical Arab, Persian, and other Islamic forces would
rely upon Russia for replenishment of their militaries. If Russia has a large interest
in Israeli energy, I dont think they will be interested in supplying the forces that
would take that interest away from them.
24.happy says:
July 3, 2012 at 5:36 pm
Good news, for a good people.
Maybe one day other peoples will mature enough to realize Israel already has.
25.neill says:
July 3, 2012 at 6:34 pm
thibaud says:
July 3, 2012 at 1:19 pm
I agree. Undeveloped and corrupt societies tend to squander their oil wealth
without developing sustainable economic infrastructure. Take away the oil etc
and they dont have much going for them.
Israel has built by far the most dynamic economy in the middle east, without oil
riches. While they will need to be more vigilant in regard to the corruption, this
would seem to a super turbocharger for an already dynamic economy.
That the leader of Russia (infamous for its pogroms) would make comments for
public consumption like these, met with predictable arab/muslim rage, is gamechangingly huge.
26.John Nelson says:
July 3, 2012 at 7:44 pm
Liberals (and their islamo-fascist friends) do not look forward to the day when the
West can give its middle finger to the 7th century theocrats and leftist tyrants
who dominate the muslim world.
27.Chris Mallory says:
July 3, 2012 at 9:51 pm
If Israel comes up with oil shale, can the U.S. stop shoveling them billions of
borrowed dollars every year and get a refund of the billions we have given them
over the past 40 years? If Israel has oil, can we finally get some American
politicians who will put America first?
28.Emes says:
July 3, 2012 at 9:59 pm

# 22 Pt 4: Israel already has ongoing reviews re projected state Med/ gas

revenues, and seems likely to adapt the Norway trust funds structure. PM B.
Netanyahu months ago declared much of those funds will be used for
Education,education, and education About 1/2 will be used for
education,research,health care,social projects,and some limited infrastructure
projects.Other 1/2 of projected gas revenues from Mediterranean gas for future
generations use of that invested interest income.The shale gas lies under around
2/3 of Israel including Negev and Arava deserts.Test shale fields underway for
several months in Israel using new tech developed by ex Shell research chief
which is far less environmentally-& less costly
29.Emes says:
July 3, 2012 at 10:09 pm
# 22 Pt 4: Israel already has ongoing reviews re projected state Med. gas
revenues, and seems likely to adapt the Norway trust funds structure. PM B.
Netanyahu months ago declared much of those funds will be used for
Education,education, and education About 1/2 will be used for
education,research,health care,social projects,and some limited infrastructure
projects.Other 1/2 of projected gas revenues from Mediterranean gas for future
generations use of that invested interest income.The shale gas lies under around
2/3 of Israel including Negev and Arava deserts.Test shale drill fields exist now in
Israel using new technology developed by ex Shell Oil research chief which is far
less environmentally damaging-& much less costly
30.Buck O'Fama says:
July 3, 2012 at 10:24 pm
Though given recent developments, I wouldnt be surprised to discover that this
entire planet is one huge shale oil deposit.
It is. The old theory that OIL( Organic Industrial Lubricant) is composed of dead
dinosaurs is pretty much dead itself.
The new theory is that Hydrocarbons are formed by the crust of the Earth sliding
over the molten interior core. It is the lubricant the earth depends on to keep
from seizing up. The new theory explains why there are huge lakes of OIL on
various other solar bodies. The dead dino theory doesnt cover that. So basically,
drill down anywhere and you will find hydrocarbons. The issue is how deep.
31.Kris says:
July 4, 2012 at 12:07 am
Bill@22: The emergence of green anti-Semitism. When Israel becomes an oil
exporter, watch the ethnic caricatures fly.
True dat.

Buck@30: Hydrocarbons are formed by the crust of the Earth sliding over the
molten interior core. It is the lubricant the earth depends on to keep from seizing
up.
OMG! You malignant despoilers of the Earth are recklessly using up this lubricant!
Earth will seize up! Were all gonna die!!11!!!1
[/sarc]
32.Ulysses S. Rant says:
July 4, 2012 at 1:06 am
J-Libertarian@4 is right if Israel could have done anything to maintain its
relationship with Turkey, it would have. Netanyahu and Co. cant change the fact
that the AK Party is becoming increasingly militant in both its domestic and
foreign policies.
That being said, this is fascinating news. I completely agree with Professor Mead
that the vast oil reserves being discovered in the West will undermine OPEC in
years to come. Itll be interesting to see how this works out for the Israelis.
33.Mgrinch says:
July 4, 2012 at 2:58 am
Interesting analysis. Israel cozying up to Russia? Not so far fetched.
First, Russia has influence in Iran, and the US has none. If Netanyahu is going to
send a message to Iran, its got to be through Putin.
Second, Russia is on Israels doorstep in Syria, without a peep of protest from
Obama. Does Israel have a choice? Why would the Israelis choose otherwise?
Playing nice with the Big Power in the area has a long history to the Jews, going
back to the days of the Kingdom of David.
34.doc feelgood says:
July 4, 2012 at 3:24 am
good news?
Well very relative as usual for all sort of egocentrically based statements. It
depends on what sort of goals mankind as a whole is trying to achieve.
We are far from reaching a solution to that tumor like problem with the
resurgence of grandiose feelings of so called superiority.
The world needs a great deal of humility instead of that kind
ethnocentric/religious/industrial babble on old stones and economic power, That
s diving deeper into darkness than ever.
35.ala schechter says:

July 4, 2012 at 3:31 am

Thats what Israel really needs. Cheap gasoline so that even more and bigger
cars can further clog the highways\\
36.Fred Scherlinder says:
July 4, 2012 at 6:36 am
The Hebrew word for truth connotes the big picture emet connotes aleph
to taf, first-and-last-and-everything-between. So its remarkable that this
otehrwise excellent and hope-inducing article (and discussion thread) never once
raised the truly big picture regarding long-term oil trends: climate change.
Not only is a carbon-based economy truly a dinosaur, but its also leading us in
the same direction to project decades more of massive drilling (especially of
shale oil which is even more carbon-intensive than the regular stuff) is to consign
our children to a denuded future.
Theres an ethical component here for the damage done to the worlds poorest
people and most endangered species. Theres also a short-signed element for
Israel itself: as the US Department of Defense already recognizes, extreme
weather and droughts and refugees driven by climate change are a major and
growing security threat and nowhere is this more pronounced than in the
Middle East.
Israel can buy a short-term economic and political boon at the cost of its longterm security and its moral compass. Or, it can embrace the stewardship ethic of
the Book at the center of the people(s) of Israel and be a light unto the nations
by pursuing its abundant solar and wind and geothermal resources rather than its
unsustainable carbon deposits.
37.Albin says:
July 4, 2012 at 8:51 am
Cheap energy is good for the global economy but not necessarily for producers
the simultaneous development of so many shale oil fields could easily lead to a
glut of the kind natural gas is facing in the USA. Two other things: the map here:
http://www.greenprophet.com/2010/11/israel-jordan-oil-shale/
Shows much of the onshore local shale is under Palestinian land, and of course in
a water-starved place the water table may be at risks that
38.John says:
July 4, 2012 at 8:00 pm
Huh? According to your map almost none of it is in Palestinian areas. In fact if you
read stories about this almost zero is in areas claimed by th PA

39.Eyal Fuhrer says:

July 5, 2012 at 7:48 am

40.crypticguise says:
July 5, 2012 at 1:08 pm
This is indeed wonderful news for Israel and the world. Muslims will simply have
to grit their teeth and continue their hateful rants.
Israel will continue to be an Oasis of Freedom and modern economic growth in a
Sea of Islamic Intolerance and 7th Century Backwardness.
41.crypticguise says:
July 5, 2012 at 1:12 pm
@FredSherlinder, regarding your worship of the Green Idol I suggest you pick up
a book on Science and stop the nonsensical search for a magical wind and sun
delivery of energy.
Ultimately, fission will be delivering unlimited energy for Israel, the United States
and those Nations that have not been inundated with the Islamic hordes.
42.SamC says:
July 5, 2012 at 1:36 pm
Golda, you are correct. Israel needs to improve its educational system. Proof
positive people like you think that mankind, even if tried its best, could change
the climate if it wanted to.
Climate change is natural. That is a lesson that needs to be added to the lessons.
43.Patrick Armstrong says:
July 5, 2012 at 1:40 pm
By the way, John Barker, Putin is a believing Christian
watch this
http://www.youtube.com/watch?v=u3d_yxJhmjk
As to surprisingly cordial visit, Mr Meade, Russia and Israel have quite good
relations.
I wish conservatives would stop believing what they read in the NYT, WaPost,
Economist et al.
44.CR says:
July 5, 2012 at 2:24 pm

As to surprisingly cordial visit, Mr Meade, Russia and Israel have quite good
relations.
Well, there ARE about 1.5 million recent immigrants from the former Soviet
republics and their children living in the country. Most of whom still have cordial
relations with the communities they left behind and many travel back on a
regular basis.
45.teapartydoc says:
July 5, 2012 at 4:30 pm
I also think that oil is not just dead dinosaurs. If it was, I think we would have run
out long ago. I think it is the result of placing high organic content rock under
extreme pressure. In other words: it is a combination of organic waste and plate
tectonics.
46.cubanbob says:
July 5, 2012 at 5:15 pm
Chris Mallory says:
July 3, 2012 at 9:51 pm
If Israel comes up with oil shale, can the U.S. stop shoveling them billions of
borrowed dollars every year and get a refund of the billions we have given them
over the past 40 years? If Israel has oil, can we finally get some American
politicians who will put America first?
Agreed but why stop there? Lets also demand that the Saudis and the Gulf Arabs
do the same along with the Japanese, South Koreans and the NATO countries
also.
Fred when you invent a car that runs on unicorn flatulence, I will be the first to
buy it. Until then, lets stick to what is known to work and not waste time and
money on fantasies.
In the meantime while new oil and gas discoveries, especially in friendly
countries are always welcome, cheap energy being the single greatest way to
eliminate world poverty, lets not get to excited until enough wells are drilled and
a realistic production estimate can be arrived at.
If this does turn out to be true, I hope the Israelis are wise enough to learn from
the other energy produces and learn from their mistakes.
47.Roger Zimmerman says:
July 6, 2012 at 8:10 am
I am hopeful about the positives here, but worry that Israels quasi-socialist (more
properly, cronyist) economic system will kill this goose in its crib. The
possibilities for corruption and interference are great.

The best way to develop these resources would be for the government to get out
of the way as quickly as possible and let the ingenuity and drive of individual
Israelis take over. To the extent that reserves exist on government owned land,
they should be auctioned off in reasonably-size tracts. Then, the governments
role would be to enforce private property rights, and nothing else. The ambitious
entrepreneurs of Israel would take care of the rest.
48.bsl says:
July 6, 2012 at 10:12 am
Re: Destructive effect of oil on economies
The actual picture is a bit more complicated.
Essentially, the distinction is between countries which have working economies
and political systems when they discover major petroleum deposits and those
which dont.
The former generally exploit their resources without destroying their economies
or preventing them from developing. For the latter, oil is generally destructive of
everything else.
Its not a difference in honesty. Major oil draws corruption like manure draws flies.
But, well developed systems can weather a degree of corruption without falling
apart where more primitive systems are crushed.
Israel has a robust economy and a stable political and economic system in place.
Large scale oil development will create tensions and corruption. It will not cause
more trouble inside Israel than it has in the US or Norway or Canada. There are
any number of remarkable, sometimes amazing stories of corruption even
murder around American oil development. Didnt trash the American economy or
destroy American politics on the macro scale. So it will turn out for Israel.
The real dangers to Israel from oil are external, from jealous neighbors and
ambitious competitors.
49.Paul says:
July 6, 2012 at 11:18 am
Progress in Israel web site
http://iei-energy.com/
50.Freedomlover says:
July 6, 2012 at 10:15 pm
Perhaps Israel will finally be able to convince US and EU that in order for there to
be a safe and durable peace, the so-called moderate Palestinians needs to
subsitute their jihadist ideology for an ecumenical one.

Encouragement and justification for murdering Jews is one leg of the official, fourlegged narrative of the so-called moderate PA/PLO/Fatah/Abbas//Erekat The
three others are: terror worship and adulation of terrorists, promise of endless
war, never peace with Israel, delegitimization of Israel by lying about the regions
history and any and all Jewish connection to ANY part of Israel even Haifa is
taught to be rightly Palestinian. This is NOT the exception to the rule. This IS
the rule. There is NO ecumenical counter narrative.
For more on what the so-called moderate Palestinian leadership advocates,
what it tells its own people vs what it tells the US/West, see Palestinian Media
Watch online. PMW principal, Itamar Marcus, has made presentations to US
Congress and Parliaments around the world. http://www.palwatch.org
51.Freedomlover says:
July 6, 2012 at 10:20 pm
Perhaps Israel will finally be able to convince US and EU to adopt the only policies
that will lead to a true peace and not just a piece of paper peace: The Policy of
the Four Nos.
NO direct or indirect funding of any Palestinian faction and NO negotiations until
every Palestinian faction abandons its supremacist ideology in word and deed,
recognizes Israel as the Jewish State and makes a 180 degree change in its
curriculum and political/media rhetoric.
NO Palestinian Authority mission in Washington D.C. The current mission is to be
closed because PAs goal of Israel elimination, its curriculum and political/media
rhetoric is the same as Hamas.
NO discussion of ever dividing Jerusalem. No part of Jerusalem has EVER in
history been the capitol of ANY Arab/Islamic/Palestinian entity. Even discussing
the possibility of dividing Jerusalem is an act of appeasing Arab irredentism and a
reward for Arab ethnic cleansing of Jews residing in East Jerusalem during illegal
Jordanian rule 1948 1968. The US is to initiate move of our Embassy from Tel
Aviv to Jerusalem forthwith, with all Euro Zone nations following quickly behind.
52.Freedomlover says:
July 7, 2012 at 4:07 pm
Turkey needs to apologize to Israel for the 2010 flotilla-hate-illa event. Turkey
collaborated with IHH, the al-Qaeda offshoot responsible for the attack, in every
way possible including giving it permission to plot and plan in, and depart from,
Turkey.
Below, THE report on IHH from The Investigative Project on Terrorism, a must read
for anyone still confused about where responsiblity for ine incident lies. As we
condemned the Taliban for giving al Qaida refuge, we must condemn Turkey for
giving refuge to IHH.

IHHs Deep, Longstanding Terror Ties

IPT News
June 9, 2010
http://www.investigativeproject.org/1998/ihhs-deep-longstanding-terror-ties
The Turkish-based charity that helped drive last weeks deadly confrontation with
Israeli commandos has deep ties to Hamas and other terrorist groups. The Hamas
ties are not in question. Turkish Prime Minister Recep Tayyip Erdogan and IHH
officials simply do not acknowledge that Hamas is a terrorist group.
IHHs web site is filled with stories and pictures showing its support of Hamas.
The coffins of the dead flotilla members were covered by both the flags of Turkey
and of Hamas. On Monday, the NEFA Foundation published a picture showing IHH
officials, along with former British MP George Galloway, who leads a similar
organization that partners with the Turkish group, at a memorial for Hamas leader
Mohammad Said Seyam that was sponsored by IHH.
U.S. officials have expressed concern over the fact that IHH representatives
have met with senior Hamas officials in Turkey, Syria, and Gaza over the past
three years, but IHH is not a designated terrorist organization in the United
States.
Its fair to ask, why not?
Coffins from those killed on the Mavi Marmara bear the flags of Turkey and
Hamas.
Hamas is a designated terrorist organization in the U.S. and the Department of
Justice spent years of investigation and millions of dollars to successfully
prosecute a Texas-based charity that sent millions of dollars to it anyway.
The U.S. Treasury has designated an umbrella organization of which IHH is part
due to its fund-raising activities on behalf of Hamas and Hamas-controlled
organizations in the West Bank and Gaza. The Union of Good is a collection of
charities run by Muslim Brotherhood spiritual leader Yusuf al-Qaradawi.
And IHH has had operations in the United States. According to a Turkish news
article, IHH spent up to 10 weeks delivering relief supplies in Louisiana after
Hurricane Katrina struck in 2005. In doing so, Yildirim was harshly critical of the
U.S. In a news release by IHH, President Bulent Yildirim said his organization was
partnering with the Islamic Center of Baton Rouge and Louisiana State University,
despite the evils of the American government:
We distinguish between the occupier American administration and the people.
Our aid is being distributed among the Blacks, the poor and the Muslims who are
being discriminated against by the Bush administration.
In addition, this report from Global Terror Alert indicates that an Illinois charity
called the Zakat Foundation of America coordinated with IHH on two convoys sent
to Iraq. Before the war, Yildirim and his charity organized mass demonstrations

that included the burning of American flags. Later, Yildirim lobbied hard to
prevent Turkish troops from joining the renewed coalition against the Baathist
regime in Baghdad.
Fox News Ben Evansky reported last week that IHH has been a United Nationsaccredited non-governmental organization since 2004. That status gives IHH
access to U.N. diplomats and enables them to speak at sessions of a number of
U.N. bodies that are streamed online around the world and translated into six
languages.
This continues despite the findings of independent investigations from the 1990s
and 2006. They found that IHH, or nsani Yardm Vakf, engaged in arms dealing
with militant groups and communicated with an Al-Qaida guesthouse in 1996.
Evidence emerging from the flotilla also indicates that the group deliberately
instigated the confrontation with Israeli commandos by recruiting a special corps
of fighters who snuck knives and other weapons on board the Mavi Marama.
U.S. Sen. Charles Schumer (D-NY), wrote to Secretary of State Hillary Clinton this
week, asking that IHHs terrorist connections be investigated:
I believe it is crucial that the State Department attempt to determine which
organizations are dedicated to providing humanitarian aid and which groups are
providing support to terrorist organizations. The distinction should be clear and
unambiguous and if there is any reason to believe that an NGO is providing
support to terrorist organizations, then appropriate measures should be taken.
A Washington Post editorial noted that all nine men killed on the Mavi Marmara
were IHH members or volunteers. A subsequent Israeli military report claimed a
number of flotilla activists had ties to terrorist movements. The statement offered
no details to substantiate the claims. As noted, however, previous aid trips by
IHH, some in tandem with the UK-based Viva Palestina, resulted in supplies and
money given directly to Hamas officials.
According to a report by the Intelligence and Terrorism Information Center, which
has close ties to the Israeli military, the violence was planned by a hard core of
40 IHH operatives briefed in advance by IHH chief Bulent Yildirim. The report is
based on statements flotilla participants later gave to Israeli security officials.
One ships officer said crew members were told to ensure no weapons were
brought on board. However, the 40 IHH activists skipped the security check
before boarding.
Some passengers on the Mavi Marmara were found with exceptionally large
sums of money on them, which the report said were meant to be transferred to
Hamas (the passengers claimed the money was for their own personal use).
The Middle East Media Research Institute (MEMRI) cites a Hamas newspaper
report that the grandson of Abdullah Azzam, a mentor to Osama bin Laden and
an icon to Hamas, was aboard the ship.
Erdogans Close Ties

The confrontation with Israel was the flotillas true objective, the Intelligence
Center report said, and it indicated that the mission was blessed by Turkish Prime
Minister Erdogan.
Erdogan owes his position to IHH, the report said. Computer files found on board
reinforce the connection between IHH and Erdogans government. Turkey is likely
the only NATO member that does not view Hamas as a terrorist organization.
Hamas is not a terrorist movement, Erdogan said, but instead is a resistance
group defending its land.
IHH and Erdogan receive continuous support from Galloway and Viva Palestina,
particularly after VP partnered with IHH during its last convoy to Gaza in January.
The IHH organization was founded by the Turkish leader and hero of the Islamic
world, Tayyip Erdogan, Galloway said during a fundraiser in Brooklyn May 21.
Turkish writers indicate this is not true, but Galloway seems intent on heaping
praise on the Turkish leader:
How I wished, as we entered the Arab world, that the Arab countries had a
leader like Erdogan. What a difference the Muslim world would be in if they were
all led by Erdogans! I have never forgotten the performance at Davos, where in
the face of the killer Peres, Erdogan called him a child killer, told him how good
he was at killing children, and stood up, unhooked his microphone, and began to
walk off the stage.
IHH has an office in Gaza, headed by part, Mohammed Kaya, who works with
Hamas. According to a separate Intelligence Center report, IHH transfers money
to Hamas in the West Bank and Gaza, including the Islamic Charitable Society in
Hebron and the Al-Tadhamun Charity Society in Nablus.
Federal prosecutors in the U.S. say the Islamic Charitable Society of Hebron was
part of the HAMAS social infrastructure in Israel and the Palestinian territories.
That assessment came in the successful prosecution of five former Holy Land
Foundation officials for illegally routing more than $12 million to Hamas. It was
based, in part, on the presence of Hamas propaganda discovered inside the
charitys office and from this internal HLF report detailing Hamas control of
various Palestinian charities.
During Viva Palestinas third convoy to Gaza that ended in January, IHH gave keys
to 145 vehicles to local authorities, including Ahmad al-Kurd, Hamas minister of
social affairs. The U.S. Treasury designated al-Kurd as a terrorist in 2007, noting
his longstanding leadership in Hamas. Al-Kurd now is the Hamas point man in
refusing to allow the IHH aid into Gaza after Israeli officials searched it for banned
material.
In February 2009, Yildirim gave a speech at a Hamas rally held in Gaza. From
here, I call upon all the leaders of the Islamic world, and upon all the peoples
Anyone who does not stand alongside Palestine his throne will be toppled, he
said.

Hamas Prime Minister Ismail Haniyeh, in turn, has heaped praise on IHH.
According to IHHs website, Haniyeh discussed IHHs support in early 2010:
The IHH has particularly delivered substantial amount of aid to the people of
Gaza. IHH President Bulent Yldrm offered help and stood beside our side during
the war. This is an example of Islamic fraternity, an indication that we are all
parts of the same umma [nation]. Muslims are like walls reinforcing each other.
Welcome. Gaza is proud of you. I pray to Allah that we will pray together in alQuds freely one day.
More than Hamas
IHHs work in support of terrorists already was known by the time it set up shop
in Louisiana.
A 2006 report from the Danish Institute for International Studies on terror
recruiting by Islamic charities cited a Turkish investigation from the late 1990s
which found guns and bomb-making manuals in IHH offices and concluded IHH
members were preparing to fight in Afghanistan, Bosnia and Chechnya:
An examination of IHHs phone records in Istanbul showed repeated telephone
calls in 1996 to an Al-Qaida guesthouse in Milan and various Algerian terrorist
operatives active elsewhere in Europe including the notorious Abu el-Maali,
who has been subsequently termed by U.S. officials as a junior Osama Bin
Laden.
Meanwhile, a French judge is sticking to his assessment that IHH played an
important role in the Al-Qaeda planned Millennium bomb plot. Jean-Louis
Bruguiere participated in a 1998 raid on IHH headquarters in Istanbul. There,
investigators found evidence the charity was a facade for moving funds,
weapons and mujahedeen to and from Bosnia and Afghanistan.
Testifying in the 2001 trial of Millennium bomb suspect Ahmed Ressam, Bruguiere
said:
The IHH is an NGO, but it was kind of a type of cover-up in order to obtain forged
documents and also to obtain different forms of infiltration for Mujahideen in
combat. And also to go and gather these Mujahideens. And finally, one of the last
responsibilities that they had was also to be implicated or involved in weapons
trafficking.
In an interview last week, Bruguiere stood by his original assessment. They were
basically helping al-Qaida when (Osama) bin Laden started to want to target U.S.
soil, he told the Associated Press.
Its worth repeating that the Mavi Marmara was one of six ships in the flotilla. A
seventh, the Rachel Corrie, was intercepted June 4. Yet violence broke out only on
the one ship in an orchestrated attack by IHH, which knew it would not be
allowed to land in Gaza.

Following the incident, Egypt has opened its border and there is talk Israel has
eased some of the restrictions on goods flowing in.
Yet the Freedom Flotilla will not be the last of IHHs efforts to enter Gaza.
Galloway, after engaging in an extensive discussion in Istanbul, announced to
thousands of protestors in London on Saturday his plans for a land and sea
convoy to Gaza in September.
53.Saul says:
July 7, 2012 at 6:39 pm
The first commenter discussing the ethis of oil producers may find this Canadian
website interesting
http://www.ethicaloil.org/
54.kent hytken says:
July 8, 2012 at 12:15 pm
This is great news for Israel that Canada will be engaging in Israels oil and gas
development. Israel and Canada have just signed an agreement to cooperate on
the exploration and development of what, apparently, could be vast shale oil
reserves beneath the Jewish state. Canada has a lot of expertise to develop
heavy oil and oil sands and the technology and expertise will be a huge benefit
for the extraction of the vast shale oil in the Negev Desert.
55.David says:
July 11, 2012 at 4:59 pm
This is all very nice, but have we forgotten climate change? We need to get off
the dirty fuels!
56.James Ferguson (@kWIQly) says:
July 22, 2012 at 8:24 am
We have discovered accessible reserves of fossil fuels, that far exceed what we
intend to exploit if we offer any credence to COP and IPCC underpinnings.
It seems either that industrial superpowers are completely naive or that they
have no intention of stopping.
It appears we must stop ourselves.
57.Stormy says:
July 24, 2012 at 4:36 pm
I am really happy that Israel may become not only self sufficient with oil and gas
reserves, but hopefully they will become an exporter. I do fear that sudden

interest in Israel from Russia and other countries may very well be self serving,
but time will tell. I have come to wonder is this oil and gas will not be the hook in
the jaws that Ezekiel 38 & 39 tells about. Russia, Iran, and Turkey are mentioned
specifically to be involved in the attack.
58.Yitzhak says:
August 30, 2012 at 7:42 am
That even Gaza will have some claim to? Excuse me?
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From the January/February 2013 issue

Broken: A Primer on American Political Disorder
Adam Garfinkle: Its no one thing: Rapid global economic change, institutional
deficiencies in governance and plutocratic smarm have reinforced each other to
create one huge tangle of a problem.
The Federal-State Crack-up
Mario Loyola: For decades, both Democrats and Republicans have been
invested in governance schemes that have eroded the Constitutions separation
of powers.
The End of the University as We Know It
Nathan Harden: The higher ed revolution is coming. Just a few decades hence,
half the colleges and universities in the United States will have disappeared, but
schools like Harvard will have millions of students.
The Math Behind the Meltdown
Chris Taylor: The history of the renowned Black-Scholes formula on
options pricing weaves through several centuries and many countries.
That history, were it better known, would have inspired a little of the humility that
was in such short supply in the world of finance before September 2008.
The Math Behind the MeltdownChris Taylor
Pricing the Future: Finance, Physics, and the 300-Year Journey to the
Black-Scholes Equation
by George G. Szpiro
Basic Books, 2011, 320 pp., $28
The financial product known as an option matters. Many people never hear of
one on an average day, but they are everywhere. Ask a modern participant in or
scholar of finance about options, and he will readily tell you that the world he
lives in is inconceivable without them. Ask anyone investigating what went wrong

with the U.S. economy in autumn 2008, and youll probably hear that the buying
and selling of options contributed to the meltdown. But what is an option, and,
assuming that it was not among the original flora or fauna in the Garden of Eden,
where did it come from?
An option is a financial contract in which a buyer purchases the right, but not the
obligation, to buy or sell something at an agreed upon time in the future at an
agreed upon price. Instead of buying or selling an equity share, foreign currency
or commodity outright at its present market price, you buy the option of buying
or selling it in the future at a certain stipulated price. As esoteric a financial
concept as this may seem, options contracts have existed for centuries. How and
why they arose, and how options trading evolved into a mathematical science in
the form of the Black-Scholes equation, is the subject of an illuminating and
entertaining new book by George Szpiro.
Szpiro, an Israeli Ph.D. in finance and mathematical economics, has worked in
business (McKinsey & Co.), academia (the Wharton School, Hebrew University
and the University of Zurich) and now journalism (Neue Zrcher Zeitung). He
aspires in Pricing the Future to tell the history of the Black-Scholes equation,
focusing on the history of markets and mathematical discovery, along with the
biographical elements of the story, rather than on its recent adventures within
the world economy. Those looking to further fix the global financial system will
find little to help them here, but those in search of the essential background to
the problem will be rewarded.
Szpiro begins by introducing the concept of options for those who are not familiar
with it. Imagine, he advises his readers, a farmer who needs to buy fertilizer
every year for his fields. Then imagine that the price of fertilizer is volatile,
exposing the farmer to fluctuating profit margins based on fertilizer costs. If the
fluctuations in fertilizer prices are higher than the farmer can tolerate, he could
for a relatively modest transactional fee buy an option for fertilizer at a set price
for six months in the future. When six months has elapsed, if the open-market
price is below that of the option, the farmer can simply let the option expire and
buy on the open market. If the open-market price of fertilizer is higher than the
price contracted in the option, the farmer can exercise the option and buy below
that price. Through the use of an option contract, the farmer has thus established
a maximum price he will pay for fertilizer. An option is therefore a kind of
insurance policy against input price increases, helping the farmer lower his risk.
For examples in modern business news, a reader might think of Southwest
Airlines and its jet fuel strategy. Southwest has upended the air travel industry in
recent decades, helping to guarantee its profitability by famously hedging
(insuring) against rising fuel prices in a more aggressive and skillful way than
other airlines. Southwest used a combination of simple and complex options and
other contracts to lock in lower fuel prices. On November 28, 2007, the New York
Times reported that Southwests hedging gains were $455 million in 2004, $892
million in 2005, $675 million in 2006 and $439 million for the first nine months of
2007. This compares to Southwests net income (as filed with the Security and
Exchange Commission in 2008) of $215 million in 2004, $484 million in 2005,

$499 million in 2006, and $645 million in 2007. If Southwest had not hedged
skillfully, it would have been exposed to volatile returns and potentially high
losses. Southwest might have gone belly up despite its well-focused business
strategy, simplified fleet and more productive workforce.
Other examples of options in the modern economy can be found in international
trade. Imagine a U.S.-based investor who wants to buy shares of a company
listed on the stock exchange of Thailand, but he is afraid of currency risk
namely, the fluctuation of exchange rates that can affect the terms of
investment. The investor can buy currency insurance in the form of a foreign
exchange option.
The use of options is not always so simple or benign, however. We know all too
well about large financial institutions that have made investments in or proffered
loans to a company and, at the same time, bought options in the opposite
direction. This is standard procedure and is not necessarily problematic; in this
case a financial institution is simply controlling its downside risk in case the
investment or loan takes a turn for the worse. If it becomes clear that the
financial institution wont need to exercise its options, it can trade them to
someone else who might want them. An option contract has a market price just
like any other financial product, and in general, these practices lower lending
costs and allow more precise control of risk. Things start to flow into ethical gray
areas, however, when one branch of an investment firm advises a client while
another branch buys options that bring in money when the client does poorly. Is
information truly separate? Can conflicts of interest be managed?
It is against that reality that the scale of options trading comes as such a shock.
In 2011, the CIA estimated world GDP at approximately $79 trillion. According to
the Bank for International Settlements, in that same year over $1 quadrillion
worth of derivatives were traded.1 The sum of $1 quadrillion sound like a big
number, and it is: Its almost 13 times as much as the value of total world output
of final goods and services. The notional amount outstanding of over-the-counter
derivatives (non-standard contracts that are not openly traded on exchanges) in
2011 was more than $645 trillion, up from just below $400 trillion in the first half
of 2006, amounting to roughly eight times the value of world output. Finally, the
gross market value (cost of replacing existing contracts) was around $27 trillion,
roughly a third of world output. Over 24 billion derivative contracts were traded
on exchanges in 2011 alone.
What accounts for the very rapid popularity of such financial products, and, some
agree, the concomitant risks they pose to global economic order if they are
mismanaged? Very simply, confidence. Options proliferate in proportion to the
confidence the buyer has in the value of the product, which is by definition
something that can only be ratified by the future. The Black-Scholes equation has
enabled buyers of options to accurately predict the future with vastly more
confidence than had previously been the case.
B

efore the 1970s, even though options contracts had existed for centuries, there
was no scientific, agreed-upon way to price them. How much should the farmer
pay for that fertilizer option? How much should the investor fork out for
protection against currency fluctuations? It took hundreds of years of progress in
mathematics, physics, statistics and other disciplines for Fischer Black, Myron
Scholes and Robert C. Merton to create their formula, which, to put it simply,
projected the price of an option by feeding five variables into a partial differential
equation: the strike price of the option, the current price of the underlying asset,
the risk-free rate, the time to maturity and the volatility of returns of the
underlying asset. As it happened, their discovery coincided with the rapid rise of
computing power, which enabled traders to apply the formula quickly and
inexpensively. The market for options exploded as a result, as contracts could be
more confidently priced and then traded as commodities themselves.
Obviously, Black, Scholes and Merton stood on the shoulders of giants, as the
great sociologist Robert K. Merton, Robert C.s father, put it in a famous 1985
book. Szpiro takes us back to the origins of modern financial exchanges, and their
respective disasters: the Dutch Tulip craze and the Dutch East India Company,
the first publicly traded company; and the Paris Bourse, the first French stock
exchange, created to boost the disastrous finances of the French monarchy. Both
histories richly describe the speculative trading on margin, efforts to get around
bans on short-selling, runs, counterparty failures, and market crashes that are
now so uncomfortably familiar to us.
But Szpiro soon gets to the meat of the book in his investigation of the lives and
research of three French pioneers of financial analysis. Jules Regnault, born in
1834, was the first to attempt a mathematical understanding of bourse activity,
and the first to make foundational assertions about efficient markets and the
potential for abuse of information. Henri Lefvre, a secretary to the banker James
de Rothschild, created the first known graphical representations of option
payouts. And Louis Bachelier, a professor ignored and spurned, laid the
foundations for much of modern options analysis. Bachelier was the first to apply
Gausss bell curve and heat diffusion equations from physics to stock price
movements, the first to assert that an options value would depend on the
volatility of a stock, and one of the first to attempt mathematical and statistical
explanations of economic theory.
Szpiro then leaves the world of early financial analysis to describe important
innovations elsewhere in science and mathematics that eventually became
foundational for the options pricing formula. He shows how the British army
doctor and botanist Robert Brown applied the Gaussian error distribution to the
irregular, random movement of particles suspended in fluidBrownian motion.
He also dives into the work of Albert Einsten, Marian Smoluchowski, Paul
Langevin, Theodor Svedberg, and the politics of Nobel Prize selection. All
eventually influenced the emergence of Black-Scholes. He spends a bit more time
on Andrei Kolmogorov, who, in a life of prolific mathematical discovery, wrote the
axioms that eventually defined the foundations of probability theory, and on the
Japanese mathematician Kiyoshi It?, who made breakthroughs in stochastic

differential equations. We also learn of the tragic life of Wolfgang Doblin, who
died an early death as a soldier fighting the Nazis in World War II. Doblin
independently created prototypes of It?s work that he had hidden for decades in
a pli cachet (a sealed envelope) in the Academie des Sciences in Paris to
prevent his work from falling into the hands of the Nazis.
Having surveyed the relevant scientific and mathematical inputs that eventually
came together to produce Black-Scholes, Szpiro returns to financial theory in the
modern era and specifically to the discovery of the options pricing model. He
describes the career of Paul A. Samuelson, the modern origin of mathematical
rigor in economics, the politics of Harvard University economics department
appointments, and the eventual revival of Bacheliers work. Then we are
introduced to the academic, personal and career histories of Fischer Black, Myron
Scholes and Robert C. Merton themselves. We follow them from various
departments at Harvard and MIT to the private sector and other destinations
beyond. We witness serendipity in science: Their discovery coincided with the
opening of the Chicago Board Options Exchange and the explosion of options
markets.
The Black-Scholes formula quickly became the industry standard, so much so
that it was directly programmed into Texas Instruments calculators for traders.
Fame, new professorships, and work on Wall Street quickly followed. Fischer Black
died of cancer in 1995 at the age of 57, two years before the Nobel Prize was
awarded to the creators of the options pricing formula. Thus, Scholes and Merton,
both still very much alive, won the award. (The formula is most frequently called
Black-Scholes because these two originally teamed up to work and publish on the
subject together, while Mertons work basically confirmed and expanded upon
theirs.)
P
ricing the Future is essentially a math and finance history bookor, put a bit
more generously, a treatise on the history and sociology of science. It is as much
a demonstration of how scientific progress is made as it is specifically about the
Black-Scholes equation. In the process, Dr. Szpiro shows a fondness for
sometimes superfluous anecdote, and he is clearly enraptured by the mystical
beauties of mathematics.
Yet Szpiro, journalist that he is nowadays, doesnt ignore the present. He
discusses the failure of Long-Term Capital Management, the hedge fund that
Scholes and Merton joined that eventually required a federally coordinated
private sector bailout. Nor is he mute about the pitfalls of the model, particularly
when those using it generate large market distortions of scale the theory was
never meant to account for. For the model to function as intended, Szpiro points
out, the equation assumes risk-free borrowing and lending at a fixed rate, no
transaction costs, constant forward-looking volatility, liquid markets and normal
distributions of price movement. This last point in particular has caused trouble in
many financial models, as rare events happen with greater frequency than the
models assume: the 1997 Asian financial crises, the 1998 Russian financial crisis,

the popping of the internet/tech bubble and, of course, the current financial mess
following from the housing bubble collapse. The models assumptions are clearly
stated, but most users of the formula are not as mindful of these limitations as
they should be. Put a bit differently, the world seems to behave in ways a bit less
normal than the risks accounted for in the Black-Scholes model.
Clearly, mistakes happen. Lets go back to Southwest Airlines for a moment:
According to Forbes, hedging saved Southwest Airlines over $3.5 billion and
made up almost 83 percent of the companys total profits between 19982008. 2
This description, by itself, makes hedging seem like a no-brainer, so why dont all
firms do it? Because hedging isnt free; its a game that costs tens of millions of
dollars to play at that scale, meaning that only large-sized players can really take
advantage of it. And what if youre wrong? Firms must account for the value of
their options portfolio, and what happens when their value crashes? Fuel hedges
that lost value caused the majority of Southwests $140 million third-quarter loss
in 2011.
In addition to the potential for firm-level failure, risk exists at the system level
when interconnectedness is not adequately understood. For example, over-thecounter (OTC) options, the customized options contracted directly between two
parties, open up both sides to counterparty risk. There is no intermediary in such
arrangements to help guarantee the settlement of the trade. When a single firm
enters into a large number of OTC options contracts, it quickly becomes difficult
to understand who is exposed to risk from what firm and what event or class of
events. If a firm at the center of many OTC options contracts were to fail and
default on its contracts, default could spread when other firms no longer get the
money they expected from Peter to pay Paul. This is the contagion risk that
sparked government intervention to prevent an uncontrolled default by LongTerm Capital Management and, later, AIG. The failure of a large and very active
firm at the nexus of complex webs of lightly disclosed options transactions can
and most likely still will cause a systemic crisis.
On the whole, greater market efficiencies enabled by a more accurate pricing of
risk is a good thing. So is the ability of a firm to insure against risk, especially if
this insurance allows a firm to take on more projects and grow. Black-Scholes only
turns into a formula from hell when its users either glibly or unknowingly violate
the parameters of its assumptions, or when the internal controls at firms fail to
contain trading that was intended to reduce risk rather than increase it. When
that happens, hedging can produce great losses, as last summers events at J.P.
Morgan have illustrated.
With the enormous volume of derivatives being traded and the gargantuan value
they represent, the stability of the financial system depends on participants
understanding the details and pricing of the options contracts in which they
engage. These contracts, the risk they mitigate and the risks they create, must
be properly monitored by all participants, including but not restricted to
regulators without and corporate risk managers within. The stability of the
financial system depends on a proper understanding and monitoring of
interconnectedness and the systemic risk raised by large players in these

markets. This understanding is aided by a better grasp of the history behind it all,
including the history of the Black-Scholes formula. Thanks to George Szpiro, we
now have that history.
Two Sides of the Same Flag: How Israel's Natural Gas Will Change the World
By Marin Katusa07/18/2012

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Relations amongst the countries of the Middle East revolve around religion and
historic allegiances. The region's Muslim countries are divided into Sunni and
Shiite camps while Jews and Christians are in a constant battle for representation.
The historic Camp David peace accord between Egypt and Israel has provided a
cornerstone for regional relations for years (though it is showing signs of strain in
the post-Mubarak era), and the United States has long supported these two
nations alongside Saudi Arabia and its allies while Russia shored up Iran, Syria,
and those in the opposing group. Grievances often go back decades, if not longer,
and there are so many interested parties that it is nigh impossible to move
without stepping on someone's toes.
But there is one force that is more powerful in the pulsing Middle East than even
religion: energy.
Oil and gas mean money and power, two great enablers that make anything
possible. Why else would one of the world's most conservative Muslim countries Saudi Arabia - align itself so closely with the United States, a showcase of liberal
thought and personal freedom?
As the birthplace of three major religions, the Middle East was destined for
conflict, but the presence of vast energy wealth has amplified and complicated
those tensions a hundredfold. It's a global truth that those with energy resources
hold the cards and those without domestic energy supplies have to do whatever
is necessary to ensure they are dealt a hand. The Middle East is home to a
disproportionate number of countries in the former category - countries bloated
with the power that comes with oil wealth.
Not every country in the region fits that bill, however. For years Israel's Achilles
heel has been energy - or a lack thereof. Netanyahu's old joke is that Moses led
his people through the desert for 40 years to the only place in the Middle East
without any oil. Decades of drilling and digging yielded no significant
hydrocarbons, leaving Israel with no choice but to spend 5% of its GDP buying

fuel from neighboring suppliers... with whom its interests conflicted and its
relations were uneasy at best.
Now that is all changing. In recent years, trillions of cubic feet of natural gas have
been discovered in Israeli waters while 250 billion barrels of shale oil have been
outlined in the country's rocks. Whether Israel will become a significant oil
producer is still very uncertain, as the economics of its shale deposits are far
from proven, but the nation is already preparing for a future funded by natural
gas exports.
This shift will generate welcome cash flow for Israel, but even more significant
than the country's newfound wealth will be its newfound political might. Israel is
already receiving visits from new friends and potential business partners, some of
them countries that have avoided or even opposed Israel until now. Russia is
leading that pack, having pointedly placed itself at the front of the line of nations
wanting to secure a piece of Israel's gas pie - and this is the same Russia that
usually supports two of Israel's greatest enemies, Iran and Syria.
In the boiling, roiling Middle East, new allegiances are never simple. Befriending
one nation almost always requires you to turn your back on another, and
changing camps is not easily forgotten. Those wanting access to Israel's natural
gas will also have to navigate a treacherous international obstacle course, as
contested maritime borders mean that Syria, Lebanon, Turkey, Greece, Cyprus,
and even Gaza all lay some claim to Israel's vast offshore gas fields.
But remember: the wealth and power that come with energy are a great enabler.
Israel will develop its gas riches. To do so, the country will need partners and
buyers, and those who line up to participate will be doing so in the full knowledge
that an Israel with energy wealth represents a completely new player in the
Middle Eastern game (a development that could well ignite a "Cold War" over
energy).
Israel's Natural Gas Revolution
The story of Israel's romance with natural gas starts in 2000, when a consortium
led by Noble Energy drilled into an offshore target called Mari-B. A few holes later,
the group had defined 1 trillion cubic feet (TCF) of recoverable natural gas, and
by 2004 the Mari-B field was in full production. Israelis embraced a domestic
energy resource: natural gas consumption rose as quickly as the country could
build infrastructure to produce and transport it.

One good discovery often prompts another, and such was the case with Israeli
gas and Noble Energy. In 2006, the American firm snapped up the chance to earn
into the nearby Tamar block, which had not yet been drilled because the previous
operator had shied away from the area's exceptionally high underground
pressures. Noble's geologists ran every test they could and decided Tamar's
potential was worth the risk. They were right: with two wells, Noble defined 9 TCF

of gross natural gas resources at Tamar, of which 6.3 TCF are considered
recoverable. It was the largest deepwater natural gas discovery in the world in
2009, and it came just in time.
As the graph above shows, Israel's natural gas revolution quickly pushed demand
from almost zero to beyond Mari-B's ability to supply it. Fortunately, there was a
country close by with lots of natural gas for sale: Egypt. In 2005, the East
Mediterranean Gas Company pipeline opened, connecting the Egyptian city of El
Arish to the Israeli port of Ashkelon. By 2008, Israel had 170 MCF of gas pouring
in from Egypt every day. Mari-B supplied the rest, and Israel became dependent
on natural gas to produce 20% of its electricity. However, all good things must
come to an end.
Today, Mari-B is running dry, and relations with Egypt are on rough ground. The
peace accord between Egypt and Israel only thinly concealed the neverextinguished Egyptian enmity towards Israel, and the Egyptian opposition everyone from Islamists to Arab nationalists and leftists - has long regarded the
Camp David accord with disgust. The gas deal that built and filled the pipeline
was a tangible product of that hated peace accord, and the opposition has
declaimed it since the day it was signed, certain that Israel and Mubarak had
conspired to cheat Egypt out of its gas revenues.
Those opposition parties are now filling the seats of Egypt's parliament. The
parliament itself is frozen, caught in a complex legal limbo, but no matter - a
series of bombings disabled the gas pipeline to Israel last year, and it has not
been operational since. The days of Israel relying on Egypt for gas - and of Egypt
pocketing a nice stream of revenue from Israel - are over.
Thankfully for Israel, timing is everything. Development work at Tamar is running
on schedule, and the first wells are expected to come online before the end of the
year. A smaller field called Noa was sped into production to bridge the gap until
Tamar can start supplying Israel's needs.
It won't be long, however, until Israel is pumping far more gas than it needs.
Beyond Tamar
Mari-B was a big discovery and Tamar was even bigger, but they both pale in
comparison to the reservoir that Noble drilled into next. Shortly after delineating
9 TCF at Tamar, Noble spudded a drill into a nearby field call Leviathan and hit a
home run. The Leviathan field is absolutely enormous, home to 17 TCF of gross
natural gas resource.
Adding in a 7-TCF discovery in offshore Cyprus and several other, smaller
discoveries near Leviathan, Noble has now discovered no less than 35 TCF of
gross natural gas resource in the region. It is far more gas than Israel could ever
use.

Export plans are already afoot. Noble and partners aim to build a liquefaction
plant so that Tamar's gas wealth can be exported globally in the form of liquefied
natural gas (LNG). They actually hope to build a floating facility, in large part
because land is so precious in Israel, and to that end they are watching Royal
Dutch Shell's progress as it builds and commissions the world's first floating LNG
plant for use in a field off Australia.
Even though it will be years before any LNG is produced in Israel, Russia is so
keen to get its hands on Israeli LNG that state energy giant Gazprom has already
signed a letter of intent with the Noble group to discuss a deal to buy 2 to 3
million tonnes of LNG annually, starting in 2016. A few months later, Russian
President Vladimir Putin visited Israel, and among the announcements associated
with that historic trip came news that Gazprom is setting up an Israeli subsidiary
to help develop Leviathan.
Once the massive Leviathan field also gets into production, Israel will need every
natural gas export avenue it can find. To that end, the country has been carefully
cultivating its relationships with Cyprus and Greece, through which pipelines to
Europe would pass (Turkey will not allow Israeli gas to cross its lands). It seems
Israel's gas wealth is already generating new international allegiances: Israel,
Russia, Cyprus, and Greece seem to be gravitating towards each other to form a
new team in the Middle Eastern game.
New Camps in the Old Battleground
That things are changing so quickly is no surprise. The countries along both
coasts of the Persian Gulf erupted into global prominence in the 1970s when
world energy shortages catapulted them into previously unimagined wealth and
political influence. If Israel emerges as a new power, those Arab countries will
remain rich, especially because their energy is cheaper to produce than the more
unconventional sources being outlined elsewhere in the world, including in Israel.
But what they keep in money, they may lose in clout. With other oil and gas
streams coming on line, such as Canadian oil-sands crude and Arctic oil, we may
be heading into a time when the world doesn't care all that much about what
happens in the Persian Gulf (as long as nobody gets frisky with nukes).
OPEC nations will not be the only ones to cede ground to an energy-rich Israel Turkey could be another big loser. For years Turkey was governed by a secular
party, which actively sought out closer relations with Israel. Now the Islamist AK
party is in charge, and relations with Israel are on the outs. If Israel does emerge
as a new energy powerhouse and establishes a cozy circle with Russia, Greece,
and Cyprus, Turkey will feel like someone who ditched a long-time friend right
before she won the lottery. More generally, Turkey's ambitions to play a larger
role in the politics of the eastern Med will have suffered a significant setback.
Egypt will also struggle with Israel's rise. As much as many Egyptians decried the
deal to sell their gas to Israel, the fact is the deal generated considerable
incomes for state coffers. That income has now evaporated, just as the country
convulses through the aftermath of a revolution. Moreover, Egypt's role as a

regional powerhouse stemmed almost exclusively from its secular governance

and its peace with Israel - these factors were so important in the old Middle East
that the US government supported Egypt to the tune of $3 billion annually. Now
Islamists are in power, and the path forward in Egypt's relationship with Israel is
very uncertain. We see the country's power waning in the coming years as it finds
footing in the new Middle East.
Then there's the United States, which will find its importance to Israel fade if the
Jewish state becomes an energy giant with a dance card full of suitors. In the long
run, the US could be hurt most of all if its best Middle Eastern friend, Israel, turns
away from its embrace and towards the strong, strategic arms of Vladimir Putin.
It's a real possibility - Russia has already wooed Israel into several waltzes. In
fact, the two nations have been growing closer for several years despite Russia's
support for Iran, Syria, and even Hamas. Bilateral trade is approaching $3 billion
annually; Russian immigrants make up 20% of Israel's population; Israel sold
military drones and other high-tech weapons to Russia after Russia's poor military
performance in Georgia in 2008; and following the Arab Spring, Israel and Russia
share an interest in preventing the spread of radical Islam in the Middle East. If
Israel can help stem the rising tide of radical Islam and provide Russia with
another steady supply of natural gas, Putin must be thinking that perhaps this
new friendship is worth the turmoil it will cause.
And cause turmoil it will, because even though alliances in the Middle East are
forged over decades, they can also change overnight, especially when the new
global currency of energy is at work. Russia is walking a tightrope in its efforts to
woo Israel while still supporting Iran and Syria, and Putin may soon have to make
a choice between old friends and new. If Russia abandons Iran and Syria, the
Sunni-Shiite balance in the region will destabilize just as Islamists are taking
power in several countries for the first time.
The old camps of the Middle East are changing. Transitions are rarely smooth,
and these transitions in who holds power in the volatile Middle East will almost
certainly provide some very rough patches.
Israel clearly sees the potential for trouble as it develops its newfound energy
riches. The Israeli Defense Forces recently approved a navy request for four new
warships, at a cost of about $750 million. The navy is concerned that the gas rigs
being built in Israeli waters will be an attractive target for terrorist attacks,
especially if Israel were to find itself in another war.
Israel knows Hezbollah has the capability to fire missiles from land to the gas
fields. And Hezbollah may not be the only terrorist group with such lethal
capacity - in February, the Israeli navy found an Iranian ship carrying six Nasr-1
radar-guided anti-ship missiles to Gaza; the navy believes the weapons were
destined for al-Jihad. In addition, Syria also has its hands on an anti-ship missile
that could reach the gas fields. Just imagine what a missile attack by an Islamist
foe on an Israeli gas rig would mean for global politics (not to mention the
environmental health of the Mediterranean Sea).

Of course, Israel's new warships will only add to a region that is packed with
military capacity. Continued tensions over Iran's nuclear program have recently
prompted the Islamic Republic and the United States to beef up their already
impressive presence in the region. Just yesterday, those tensions led a gunnery
team aboard a refueling tanker in the Persian Gulf to fire 0.50-cal rounds at a
small, fast-moving boat, killing one person. It now seems the boat was a fishing
vessel whose crew did not understand warnings to change course, but the navy
personnel who decided to shoot were concerned it could have been an
explosives-laden suicide skiff heading for an American warship.
While that altercation was seemingly unrelated to Israeli natural gas, in reality
everything that happens in the Middle East is about energy. After all, the United
States is drawn to the Middle East to protect its oil interests, and the reason it
can act there with such force is because it buys billions of barrels of oil from
Saudi Arabia and others in the region.
In a region that revolves around energy resources, Israel has long been at a
major disadvantage, scrambling to secure supplies of the oil and gas it needed.
Today, all that is changing, and Israel's newfound natural gas wealth will generate
a sea change not only for the Jewish state but for the entire region and everyone
involved in it. Israel is gaining clout, Russia might be changing sides, Iran is
feeling vulnerable, Egypt is losing a major customer, regional and global
allegiances are shifting, and we are being reminded that energy resources hold
the real power in the world's most volatile region.
Additional Links and Reads
Oil Near Seven-Week High on Iran Tensions, Stimulus Speculation
(Financial Post)
Oil is trading near its highest level in seven weeks because of estimates that US
supplies declined last week, concern that tensions with Iran will worsen, and
signs that the Federal Reserve may boost stimulus measures. US crude stockpiles
fell for the fourth straight week, helping to slowly erode the biggest glut since
1990. Meanwhile, Secretary of State Hillary Clinton said from Jerusalem that the
US will use "all elements" of American power to prevent Iran from obtaining
nuclear weapons. But in his semi-annual report to Congress, Ben Bernanke
stopped short of providing stimulus, instead telling lawmakers the central bank
was considering a range of tools to help the economy, but for now would
continue to wait and assess. Nevertheless, the spot price of WTI crude for August
delivery rose to US$88.92 a barrel.
Rich Nations Losing Control of Oil Markets (Winnipeg Free Press)
Next year, for the first time on record, the wealthy nations of Europe, North
America, and Japan will account for less than half of the world's oil usage,
according to the latest projection from the International Energy Agency. The shift
reflects both growing efficiency in wealthy nations and growing prosperity in poor
countries, but a world in which the majority of oil consumption is happening in

China, India, and Latin America is a world in which America's energy fate is driven
by forces beyond its control.
LNG: US Weighs the Cost of Gas Exports to Economy (Financial Times)
With the price of gas in the US now a third of that in Western Europe and a fifth of
that in Asia, interest in developing liquefied natural gas (LNG) export capacity is
growing rapidly. Proponents argue that exports will help drain a glutted market;
detractors argue that competition from exporters will drive domestic prices up.
And since a chunk of those exports would go to countries with which the US does
not have free-trade agreements, the government can only approve LNG projects
if they do not harm the public interest, which increased fuel costs would. The
Department of Energy is now studying whether the harms of exports outweigh
the benefits, and no new liquefaction projects will be approved until they come to
a conclusion.
Thermal Coal Weakens Further (Calgary Herald)
After falling significantly in recent weeks, thermal coal prices are now down 30%
year-over-year, weighed down by slowing Chinese growth, a shift to cheap natural
gas, and tough environmental regulations. The US thermal coal market has now
moved into surplus, and miners that do not respond by cutting production and
delaying spending plans could well meet the same fate as Patriot Coal, which
filed for bankruptcy last week.
Cleaning The Confusion About Exporting U.S.Crude Oil & Refined Products
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The oil & gas industry has continued its search for new deposits of oil and gas.
Federal regulations have put many parts of the Gulf of Mexico, the East and West
Coast and other areas off limits. Thus the U.S. is forced to import foreign oil.

Ads by Google
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Clearing Up The Confusion
There are stories going around about the U.S. exporting oil and refined products
and it is being labeled as a bad idea.
Let's set the groundwork. I worked for 22 years as Director of Public Affairs for the
Louisiana Mid-Continent Oil and Gas Association. Yes, I wrote press releases and
gave interviews. I also did a lot of research on a lot of issues.
At one time, it was absolutely illegal to export United States crude oil. That law
was changed.
We do export some oil today. It makes more sense to export oil produced in North
Dakota and Montana to Canada than it would to try and send it to a U.S. Refinery.
North Dakota is having an oil boom and there is not enough refining capacity in
the area. It would make more sense to export Alaskan oil to Japan, but we don't
do that.
Our biggest source of imported oil is from Canada. OPEC as a group supplies
more oil to the U.S. than any other group, but on a country by country basis,
Canada is our biggest crude oil supplier.
Louisiana, where I live, has an active shrimp and crawfish industry. There is a
large supply of Chinese shrimp and Crawfish available in the state. (I know most
of you would spell Crawfish as Crayfish, but in Louisiana it is Crawfish).
Crude oil is absolutely worthless.
If I parked a tanker fill with oil at your house you would have a major problem. No
one would buy it from you. It does not smell good and you really cannot burn it
because it produces too many emissions.
However, once the oil is refined, it is turned into many value-added products,
such as gasoline, aviation fuel, diesel fuel, motor oil, chemical feedstocks, waxes,
solvents and other items.
In Louisiana, we have 17 refineries capable of refining almost 7 million barrels of
oil each day, which is about 2.5 billion barrels per year and Louisiana ranks
second behind Texas in refining capacity.

By exporting the refined products, you improve the balance of trade. You offset
some of the impact of importing oil by exporting refined products.
Next, all oil is not created equal. Some lighter oils cannot be turned into gasoline.
On average, a barrel of oil will yield 18 to 20 gallons of gasoline. You cannot turn
a whole barrel of oil into gasoline. So, you make the other products. Europe uses
more diesel than we do. We export some diesel. Their low low-sulphur demands
are not as strict. When you think you have squeeze the last ounce of liquid fuel
from a barrel of oil you are left with something called coke. It is similar to the
asphalt that is used to pave your streets. That coke goes through a device called
a Coker at a refinery, where even more liquids are extracted. The remaining
product is fuel grade coke, not too much unlike coal and is used in Europe and
not the United States.
I posted this on one of the forums, but for the benefit of everyone else, the
United States is not in the oil production business. It leases offshore areas and
onshore lands to oil companies. An upfront bonus is paid by the oil company
before they drill the first well. An annual lease rental fee is paid. Then, a royalty is
collected on each barrel of oil produced. Depending on location, the minimum
royalty can be from 12.5 percent to more than 18 percent. The royalties are
collected by the federal government before any of the other expenses are paid.
The oil and gas industry is one of the most highly taxed industries in the country.
There are many tax breaks, which were originally called tax incentives. If they are
removed, the industry passes the cost on to the consumer in the form of higher
prices. If the government would not collect royalties the price of gasoline would
be cheaper.
However, petroleum revenue is the second largest source of revenue for the
country. The personal income tax is first.
Oil produced on private lands is not taxed directly by the federal government.
However, the royalty owners do have to pay income taxes on the money they
earn. All oil producing states have a severance tax, or a minerals-in-place tax
that is collected at the state level. In Louisiana, the severance tax collected on oil
produced on state lands, water-bottoms and private lands is 12.5 percent.
There have been a lot of comments, forums, etc. about recent reports. I cannot
find those reports and I have considerable experience in finding that information.
Gasoline is expensive because oil is expensive. Oil should not be as expensive as
it is, because the global supply meets the demand. However, stock traders,
speculators, commodity traders are pushing the price up because of the
instability of the global economy, the threats by Iran, the U.S. decision to deny a
permit to the Keystone pipeline from Canada and the Administration's general
attitude toward the oil and gas industry.
Companies cannot voluntarily reduce oil prices or take a loss by charging the
consumers less. They would be faced with below cost selling laws at the federal

level and in many states. Stockholders, who include virtually anyone having an
investment in any mutual fund, would be unhappy. Major stockholders would
probably file suit against the Board of Directors. The U.S. would sue for
underpayment of royalties and the states would sue for the under payment of
severance taxes.
Finally, there is no Mr. Exxon or Mr. Chevron, those companies and the other
major companies are owned by thousands of shareholders who want the
maximum return on their investment. That is not an unreasonable demand.
Oil prices can go down if the following happens.
__The global economy stabilizes.
__The United States opens up more areas for drilling in the Gulf of Mexico, East
Coast, West Coast and many onshore government lands.
__The situation with Iran and its threats settle down.
__Finally, OPEC could either lower its benchmark price or increase its production.
All or most of the easy oil that OPEC could produce has been found. Therefore,
the drilling and production costs for OPEC oil have increased.
I am trying to present facts. My primary sources are the U.S. Energy Information
Administration, the American Petroleum Institute and my own studies of the
industry over the past 22 years. Some will say I am bias because I worked for the
industry. The same industry was the one that said my job had been eliminated
after 22 years of faithful service. Therefore, some could say I have an
antagonistic attitude toward the industry. Neither is true. The information I have
presented here is accurate to the best of my knowledge and ability.
In conclusion, I know the oil industry is not perfect. There are probably some
stations charging more than they should. The industry has had accidents, such as
the BP blowout where 11 people were killed. However, overall, the industry has
an outstanding safety record. It is constantly striving to do better. When
hurricanes Katrina and Rita roared through the Gulf of Mexico, the U.S. Coast
Guard commended the industry for its responses and noted that only a small
amount of oil was spilled. The onshore spills, when the levees broke, were
greater.
There is one last thing to mention. Someone is soon going to suggest that the
President order the use of the Strategic Petroleum Reserves to lower the price of
gasoline. There is not enough oil in the SPR to have an impact on global prices.
The government does not give the oil away. it sells it to the oil companies at
market prices, or the companies borrow the oil and then replace it.
This is what happened after Katrina and Rita. Many offshore wells were not
producing. Many pipelines were not functioning because of the lack of electrical
power. By using the SPR, the nation was supplied with gasoline. All of the
borrowed oil was replaced by the respective companies. There were some

gasoline shortages in some places, but for the most part the nation had an ample
supply of gasoline--we also imported gasoline from foreign countries. The oil and
gas industry is a global industry and we must think of it that way, otherwise, we
will face higher prices, shortages and other problems.
Still Trying to Clear Up Oil Confusion
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Regulatory Taking: When are public restrictions on your land illegal?
Trying to Clear the Confusion About Oil By Using Facts
Recently, in commenting on a couple of Hubs, there have been a couple of people
questioning my knowledge of the oil and gas industry and claiming I needed to
do more research. They may never see this because they are not among my
followers. They have the First Amendment constitutional right to their opinions
and I would argue on their behalf if anyone said they did not.
Never, have I claimed to know everything about the oil and gas industry. The two
persons offering criticism includes one person who worked in the industry and
one who has a son, who worked in the industry.

The issue is over the price of oil. It has been my ongoing belief that any
immediate relief in lower oil prices will have to come from OPEC, because those
countries control most of the oil in the world. I am going to insert a chart further
down this Hub that shows the proven reserves in many countries and the world
total. These numbers do not include the shale oil reserves that are being
developed and I will also discuss that.
It has been argued that the U.S. has plenty of oil and all we have to do is "drill
baby drill." According to the CIA World Record Book, the U.S. has 20.6 billion
barrels of proven reserves of oil. There are more unproven reserves, but those are
only estimates and they change all the time.
According to the CIA World Record Book the total amount of oil reserves in the
world is approximately 1.5 trillion barrels of oil. That means the U.S. has a little
less than 2 percent of the world's oil supply. Now, remember, this is reserves in
the whole world. The chart below will give you a list of the countries with
significant reserves. You can do your own math if you wish.

Source: CIA--World Fact Book

All right, using the chart we have a picture of where the oil reserves are. The U.S.
reserves rank as the 25th largest in the world. That is not a drop in the bucket.
Now, lets discuss a few things about oil. You can only pump oil out of the ground
so fast. If you do it too fast, you will lose the pressure of the reservoir where the
oil is trapped, which is what pushes it to the surface. If you lose the pressure, you
leave a lot of oil in the ground that cannot be recovered with present technology.

Next, to get this oil you have to drill for it. Before you drill you have to get a
lease, which may be with the federal government, in the case of Gulf of Mexico
activities, national parks and other such places or from private landowners.
Usually, you pay an upfront bonus, an annual rental fee and a royalty, which is a
portion of the oil. Usually, the operating company pays the landowner money for
the oil it sales, but in some cases the landowner has the right to take the oil in
kind--actually own the oil, but then they have to find a buyer, pipeline to
transport, etc. The amount of the royalty is a percentage of what the operator
gets for selling the oil. There is a minimum royalty on federal leases, but usually
the royalty payment is higher, at least one-fourth or 25 percent of the value of
the oil.
However before you get around to drilling the well, an environmental impact
statement will have to be developed and presented to the public. You have to get
permits from either the state or federal government, depending on where you are
drilling. You have to present a plan as to how you will dispose of waste water that
comes up with the oil, used drilling mud, used drill pipe, etc.
Then if you are drilling in an area where people do not want you to drill, like those
people living on the Florida coast, you will have to deal with the lawsuits that will
be filed.
However, this is assuming that you are in an area where drilling is even allowed.
The map below shows the areas that are off-limits to oil and gas exploration. The
numbers in the shaded area represent the estimated amount of natural gas in
those areas that oil and gas companies cannot produce, because no drilling is
allowed. The white spaces you see on the east coast represent those states'
territorial waters. They are off limits as well, but are not part of the federal
moratorium.

So far figures have been supplied about oil reserves and areas where drilling is
prohibited by either federal or state governments. In addition to what is shown on
the map of the lower 48, drilling is also prohibited in the Arctic National Wildlife
Reserve (ANWR), which holds tremendous potential for oil production.
Now, lets look at shale oil. Most people have probably heard about shale gas and
have probably noted that their utility bills, if the local utility company is using gas
for its fuel source, has dropped significant, because natural gas prices are
extremely low. In fact we have so much gas that we are exporting it as liquefied
natural gas. However, the price is so low, that many companies are giving up on
gas and looking to spend their money on shale oil production.
According to a story published in the New York Times on May 27, 2011, a 17 mile
stretch of road between Catarina, Texas and the Country Seat, Carrizo Springs is
"the hottest new oil play in the country, with giant oil terminals and sprawling RV
parks replacing fields of mesquite."
The article states that this field, known as Eagle Ford is just one of 20 new
onshore oil fields that "advocates say could increase the nation's oil output by 25
percent within a decade." That amounts to a 2.5 percent increase per year. Also,
early estimates of these types of finds are usually slightly exaggerated, because
nobody knows for sure how much oil is recoverable. Also the future of shale oil
and gas development has its problems, because both involve using the "fracking"
method. Fracking has its detractors because it uses a lot of water to push the oil
or gas out of the ground. Some fear aquifers may be damage or rivers and
streams could be polluted.
The link for the New York Times article is posted below just above the next map. .
The article adds, "The new drilling makes economic sense as long as oil prices
remain above $60 a barrel, according to oil companies. At current oil prices of
about $100 a barrel, shale wells can typically turn a profit within eight months
three times faster than many traditional wells"
Therefore stories about $10 oil are not accurate. Granted, $60 is better than
$100, but the oil is going to be sold at market price. If the global market price is
$100, the shale oil is going to sell for $100, which is great for the oil companies,
many of which will be independents and not majors, and the people who have
royalty rights. For the rest of us, it will still mean the continuation of higher
gasoline prices.Oil companies are going to charge what the market will bear, just
like any other business. Also, remember, these are early predictions, which in my
experience, usually prove to be a little too optimistic.
Finally, the other point I was called on was the fact that there are not enough
drilling rigs or drill ships available to drill in all the places that are off limits and in
the new shale plays. Also, there are not enough trained personnel.
According to Baker Hughes, which is the company that keeps track of drilling rigs
as part of its business, The United States has 1,968 rigs working at this time.
Canada has 352 and the rest of the world has 1,204. There are a few idle rigs and

some being overhauled and a few being built. However, some of the older rigs
will be taken out of service. If every off limits area was opened to exploration, you
would probably need at least another 2,000 rigs. Rigs are expensive and you do
not build them overnight.
There is one more point to make. Many people like to blame the President for the
high gasoline prices. Well, it is an election year, so that is not unusual. Others are
blaming the political parties.
This is one point my old boss and I agreed upon, views about oil and gas
exploration are based more on geography than on party politics.
The map below shows here are only 55 votes in the producing states. That is
going to drop by one because Louisiana has lost a congressional seat. However, it
takes 218 votes to repeal the Congressional moratoriums. That is not going to
happen any time soon. So a lot of our 20 billion barrels of reserves are not going
to be produced any time soon.

Oil in Shale Sets Off a Boom in Texas - NYTimes.com

There are not enough Congressional votes in the oil and gas producing states to
force the lifting of the offshore moratoriums. The attitude toward offshore drilling
is based more on geography than on political party affiliation.

Well, that about wraps it up. There are many other issues associated with oil and
gas exploration and production and refining has its own set of issues. For
example, according to the Energy Information Administration, U.S. refineries are

operating at about 90 percent of total capacity. If we increase our production, and

the price of oil does drop, we are going to increase our consumption, which
means we may someday have to import gasoline in order to meet demand. The
last new refinery built in this country was in Garyville, LA in the 1970s. That
refinery recently underwent a major onsite expansion. Expansions are possible.
Building a new refinery from the ground up is highly unlikely, because of
economic reasons and the anticipated environmental protests.
Finally, if we increased our production, the alternative fuel initiative will suffer a
serious setback. That is not going to sit well with a lot of people.
For those of you who do not know, I was Public Affairs Director of the Louisiana
Mid-Continent Oil and Gas Association for 22 years where one of my
responsibilities was research along with media relations. I never mislead media
and was never accused of doing that. I assure you, what I have presented here is
truthful and accurate to the best of my ability.
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Oil groups set to export US crude
By Gregory Meyer and Ed Crooks in New York
Some of the worlds biggest oil companies and traders are poised to export
substantial amounts of crude from the US for the first time in decades, as
booming output there promises to reshape global energy markets.
Royal Dutch Shell, BP and Vitol, the worlds largest independent oil trading house,
are among the six companies known to have applied to the US government for
export licences, the Financial Times has learnt.

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A surge of exports from the US would affect oil trading patterns between Europe,
west Africa and North America. Greater supplies in the Atlantic basin are likely to
put pressure on physical prices of other crudes in the region, particularly Brent,
the North Sea benchmark.
Oil prices have this year soared to well above the $100 per barrel level that many
governments consider a drag on economic growth.
US federal rules and the countrys dependency on imports have kept all but a
trickle of crude from leaving the US. But a surge in supplies from states such as
Texas and North Dakota have prompted companies to seek out refinery
customers in Canada.
As rising crude volumes reach the coasts, pressure should build and will trigger
policy debates about whether to expand the list of allowable countries beyond
Canada, said Ed Morse, head of commodities research at Citi.
Domestic oil output in the US has rebounded strongly, to its highest level since
1995, after drillers pioneered new techniques to coax oil from reserves previously
regarded as uneconomic. Rising exports are likely to influence debates on energy
independence in the US, whose petroleum import bill was $436bn last year.
Exporting US crude requires a licence from the Bureau of Industry and Security, a
branch of the US Department of Commerce. The US has exported less than
100,000 barrels per day of crude in the past decade, a fraction of the 9m barrels
imported daily. Its generally prohibited except for a whole host of exceptions,
said John Felmy, chief economist at the American Petroleum Institute. By
contrast, the US is exporting record amounts of refined fuels such as petrol.

Shell confirmed it recently applied for licences to export domestic crude. Crude
oil trades on a global scale and imports/exports will follow supply and demand, it
said.
BP received a licence to export to Canada but has not yet used it, while Vitol has
applied for a licence, people familiar with the matter said. Both BP and Vitol
declined to comment.
The Department of Commerce refused to confirm or deny the existence of
licences or licence applications, citing US law. But it said exports to Canada had a
presumption of approval.
Until now, only minimal amounts of US crude have been exported overland from
the north of the country to Canada. Traders, though, now want to export crude by
tanker from the Gulf of Mexico to the Atlantic coast of Canada, where Imperial Oil,
Irving Oil and a unit of Korea National Oil Corp each own a refinery. In the Eagle
Ford shale of Texas, production has jumped to 280,000 b/d from almost nothing
four years ago and its low-sulphur crude is ill-suited for many refineries nearby.
One advantage of exporting the crude to Canada is that the US Jones Act
demands more expensive US-flagged ships for domestic routes. Poten & Partners,
a ship broker, estimates it would cost less than $1.50 per barrel to ship crude in a
foreign-flagged medium-sized Aframax tanker from Texas to the largest Canadian
refinery at St John, New Brunswick. A shorter journey from Texas to refineries in
Philadelphia recently cost $4.55 a barrel.
This is not about exports or imports, said Lucian Pugliaresi, president of the
Energy Policy Research Foundation in Washington. Its about transportation and
processing efficiency.
Refineries in Canada are important fuel suppliers to US markets. Irving says its St
John refinery supplies 20 per cent of total petrol and diesel imports to the US
northeast. Under longstanding policy, the US government is authorised to issue
licences for crude exports to Canada for use in Canada or the US.
At the port of Corpus Christi in Texas, locally produced crude is being loaded for
outbound shipment for the first time since the 1940s, said Frank Brogan, deputy
port director. Thus far tankers have sailed only to other US ports, he said.