After saboteurs blew up a section of the Egyptian natural gas pipeline, which
conveys gas to both Israel and Jordan, for the third time in five months on
Monday morning, experts had conflicting predictions as to the impact on
electricity prices, but urged the country to continue to develop its alternative
RELATED:Egypt gas pipeline to Israel blown up for third time Bombing attempt on Egypt-Israel gas pipeline fails
While the outcomes of this explosion will in all likelihood be
similar to those of the previous two occurrences – more expensive, polluting
fuels will be used as backup during the period – this third incident has made
experts increasingly doubtful of Egypt’s gas reliability.
‘No such thing’ as global market rate for natural gas'
In the wake of
last week’s announcement from the Public Utility Authority that electricity
prices could increase by 20 percent in 2012, industry leaders expressed hopes
that such a rise would not be further influenced by the events in
“You are losing a second supplier that was important to the
industry and hopefully the newcomers. The new, recent discoveries will create
eventual competition,” Prof. Eytan Sheshinski, of the Hebrew University’s
economics department, told The Jerusalem Post on Monday night.
no objective reason for [price] rising,” he continued, noting that prices are
determined by a sole seller and a sole buyer.
“I hope that this will not
happen. The government and the electricity company should be firm in their
JPOST VIDEOS THAT MIGHT INTEREST YOU:
But others feared that despite having no “objective reason”
for price hikes, the country might see some regardless.
“A disruption in
supply of Egyptian gas to Israel has a significant impact on the electricity
tariffs in Israel,” Amit Mor, CEO and energy specialist at the Eco Energy
consulting firm, said.
Mor said he felt price rises might be inevitable
due to the Israel Electric Corporation’s need to replace the gas with sources
like coal, heavy fuel oil and diesel, as well as to extract gas quicker from
Israel’s own depleting Mari-B reserves in Yam Tethys.
While Egyptian gas
only costs $4.5 per million British thermal units, diesel costs more than $40
after taxes, coal costs about $5.5, and heavy fuel oil costs $17 plus negligible
taxes, according to Mor.
“The government has some leeway, has some means,
to lower the impact on electricity price increase by allowing the IEC to utilize
the less costly but more polluting heavy fuel oil,” he said.
increases due occur, however, Mor said he expected to see effects far beyond the
electricity market. A price increase would have “a macroeconomic impact,”
spurring a resultant increase in prices “of many domestically produced products,
from food to retail sales,” and also negatively impacting “the comparative
advantage of Israeli export manufacturing,” he explained.
the experts maintained, prices can only be determined by the buyers and
“Electricity prices are not set by the market or even by the
fuel input – they’re policy instruments and that’s okay,” added
Brenda Shaffer, an expert on energy policy and management in the
School of Political Science at the University of Haifa. “They should be high
enough to keep consumption down and low enough to allow economic
No matter what happens to the prices, however, the latest event
proves just how unreliable the Egyptian gas supply is, she
“Basically, it’s like, how many times do you have to bump your head
on your bed frame until you fix it?” Shaffer said. “It’s another reminder that
in all the considerations about what Israel needs for consumption, it shouldn’t
count on the Egyptian supply.”
“At least [before] there was the hope that
the gas supply would be resumed and maintained,” Mor agreed. “But with the
current explosion the Egyptian government is facing a major challenge in
resuming gas supply and meeting its contractual agreement with the Israeli
Nonetheless, Mor said he did think that gas would eventually
begin flowing again from the Egyptian pipeline.
“The Egyptian government
and the Egyptian natural gas company will do their utmost to renew the gas
supply, and it should be noted that also Jordan is highly affected, in fact much
more than Israel, because it’s much more heavily dependent on the Egyptian gas
supply for electricity than Israel is.”
Shaffer’s picture was a bit
“We don’t even know what’s going to happen in Egypt in terms of
government,” she said. “Does the interim government want to keep the supplies up
for business as usual? Yes.”
But there is no predicting what will happen
in the long-term, she continued, and even putting aside geopolitical concerns,
Egypt “doesn’t produce enough natural gas for stable exports.”
did agree, however, that Jordan will face far worse consequences than Israel
“All their gas is imported and a higher percentage of their
electricity is produced by gas. Israel can balance with Yam Tethys gas,” she
said. “I think in the long run Israel is going to be exporting to
Israel will have sufficient resources once the Tamar and
Leviathan gas fields are developed, but it must find alternatives for the
short-term, according to Shaffer.
“After a year and a half of muddling
through until Tamar comes online, there won’t be these questions of supply
anymore,” Shaffer said. “So we just need a year and a half of creativity and
then Israel will be in a good situation.”
CEO of Arava Power Company Jon
Cohen advocated increased government support for the development of the solar
industry, as “the sun cannot be sabotaged.
“It’s the safest and most
available energy source in Israel,” Cohen said in a statement.
security, energy independence and balancing the appropriate combination of
energy sources are of critical economic importance to Israel’s
Meanwhile, Mor encouraged bringing in a permanent liquefied
natural gas (LNG) regasification unit, which he said would be “strategic
insurance for the natural gas supply” and which he estimated would take about a
year and a half to install, similar to the temporary LNG buoy that the
government has decided to hire.
Acknowledging “the shadow of flames that
at this moment are towering over the source of the sabotaged Egyptian gas,”
National Infrastructures Minister Uzi Landau stressed to the Knesset’s Finance
Committee on Monday that Israel is prepared to deal with the loss.
are not expecting disruptions in the electricity supply,” Landau said. “We went
through this in the past, and we are set.”
Join Jerusalem Post Premium Plus now for just $5 and upgrade your experience with an ads-free website and exclusive content. Click here>>