The conflict in Gaza is estimated to have cost Israel’s economy nearly $3 billion in damaged property, diminished manufacturing, loss of tourism, and a drop in consumer spending. And while Israel’s economy has fared well through other conflicts over the past decade, this latest crisis has exaggerated an already sluggish Israeli economy.
This week, Bank of Israel’s governor Karnit Flug cut interest rates to historically low levels, warning, “We are definitely in a slowdown in activity.” The Gaza conflict also conflates a struggle within the Israeli government on paying for national priorities like security and social welfare, while not raising taxes on middle class families. Government ministry budgets have already been cut by two percent for the rest of the year, and Finance Minister Yair Lapid has announced that Israel’s deficit could rise to as much as 3.5% of GDP.
Yet perhaps the most effective and wide-ranging solution to these economic challenges remains literally just below the surface. By advancing Israel’s development and production of energy in a safe and responsible manner, the Israeli government will stimulate economic growth, generate much-needed revenue for state budgets, create thousands of new jobs and lower energy costs for manufacturers and consumers alike.
Israel has a range of energy opportunities – offshore natural gas in the Eastern Mediterranean Basin, as well as potentially massive reserves of oil shale in the Shfela Basin.
It has been less than five years since the discoveries of major natural gas deposits in the Eastern Mediterranean Basin, and already close to half of Israel’s energy grid is powered by natural gas. According to Noble Energy, the shift to natural gas has improved Israel’s economy by providing billions of dollars in reduced fuel costs alone, and by the government’s own estimates, exports of natural gas are expected to net state coffers $60 billion over the next two decades.
But that is only part of the story. Back on land in the Shfela Basin, Israel Energy Initiatives (IEI) estimates that there are a whopping 150 billion barrels of oil – nearly 60% of Saudi Arabia’s oil reserve – packed in sedimentary rock.
According to international consulting firm BDO, developing this natural resource will result in 636 direct jobs at full commercial production, as well as 2,140 additional jobs connected to the business. Many of these are high-paying jobs are for engineers, scientists and technicians.
American companies are at the forefront of the effort to develop these natural resources. The private sector is ready to invest, develop and contribute to Israeli’s economic growth, but we need a partner in government that works to support expanded and responsible energy production.
Today’s vote in the Jerusalem District Committee for Planning and Building on the IEI pilot project in the Shfela Basin is a vital opportunity for the public sector to support economic development. In this case, IEI is proposing to drill an exploratory well and extract 500 barrels of oil at a rate of roughly two barrels per day. Only once this limited demonstration phase is completed and shown to be environmentally safe will a more expansive commercial operation commence.
Private-sector growth peaks when smart government policy creates a healthy and predictable regulatory environment.
Today’s vote is an important opportunity to support these important commercial efforts. The private sector understands the economic promise of Israel’s energy potential, and we are confident the government of Israel does as well.
The author is executive director of the US Chamber of Commerce’s US-Israel Business Initiative, the only Washington- based national program focused on advancing business partnerships between the United States and Israel.