Yuval Steinitz’s Sad Metamorphosis

From defender of public coffers to misleading the public on gas prices, in only four years.

Emil Salman

When Yuval Steinitz served as finance minister, he would bustle from television studio to radio studio, from one newspaper to another, lecturing tirelessly, zealously and cheerfully about his invention, second only in global significance to the invention of penicillin – the two-year budget. It became kind of a joke in media and political circles. But it will pale compared with the “I extracted hundreds of billions from the gas tycoons on the Sheshinsky Committee” campaign now in process.

First of all, Steinitz deserves big credit for what he did four years ago on the Sheshinsky Committee, which was discussing the royalties the state should get from natural assets. Steinitz was bucking most of the Finance Ministry officials and without the backing of the prime minister.

We all suffer from short memories, but many remember the pressures and delegitimization that Steinitz and his few supporters underwent. Prime Minister Benjamin Netanyahu, too, almost knifed him, and the people of Israel, in the back.

It was one dramatic morning in January 2011: The governor of the Bank of Israel at the time, Stanley Fischer, threw his weight behind Steinitz, sending a message to the prime minister not to torpedo the Sheshinsky recommendations. “Interested parties must not be allowed to influence the distribution of the gas profits by illicit means. The public must not be affected by dirty tactics and personal affronts,” Fischer actually stated in public.

The same logic that guided Steinitz on the committee should be guiding regulators today regarding the energy market. But if in 2011 the affected monopoly went into shock at the sudden civilian uprising against it, in 2015, the monopoly has overcome the regulators and voided the Sheshinsky committee’s achievements. The monopoly has achieved its high prices and anchored the status of itself, as a monopoly, for long years.

But the metamorphosis of Steinitz himself is sad. His transition from the Finance Ministry to the Energy Ministry turned him into a captive who identifies with the interests of the monopoly.

The picture shows Steinitz at a cabinet meeting three weeks ago, defending the monopoly. He is showing a graph based on 2014 data, that ostensibly proves the prices the gas monopoly is charging in Israel are low. But the graph misleads threefold.

Firstly, it shows all countries, not just the ones producing gas, like Israel. The price of gas in the gas-producing countries is much lower. Second, he’s ignoring the fact that gas prices vary by region. In most places, the cost of its liquefaction and transportation is the main cost; in Israel, the gas has hardly any distance to be transported.

But it is the third part that begs dubiety about the minister’s motives.

The asterisk below the graph, which is supposed to prove that gas prices in Israel are among the lowest in the world, says the funniest sentence: “The average prices in 2015 will probably be lower in Israel and in most countries.”

Hmm? In July 2015 the Energy Ministry draws a graph presenting 2014 figures, and explains that in 2015, the prices are expected to be lower? Doesn’t the ministry have figures for 2015? Every website and newspaper and corporate financial statement does. They know perfectly well that gas prices imploded in 2015 practically everywhere in the world. In some markets, it fell 20% and in some, 50%.

A quick check reveals that the gas prices Steinitz presented at the cabinet meeting were tens of percent – to 100% – higher than the actual prices in those markets. The prices in 2014 were at record heights.

I asked Steinitz’s spokeswoman why the energy minister chose to present, in the summer of 2015, prices from a year before. She explained that the data were results of surveys conducted by private government companies and are therefore published at a delay; right now all they have for the first quarter of 2015 is incomplete data. “The minister presented the latest full-year figures, which was 2014, because it is more based and accurate,” she said.

Steinitz knows at this point that the data he presented was misleading, if not to call it something worse – because gas prices have dived in the past year. He didn’t have to wait for those “official reports” his spokeswoman mentioned. He could open the quarterly reports from Noble Energy, which presents the final average price at which it sells energy units.

The average price tumbled from $4.81 in the first quarter of 2014 to $2.72 dollars in 2015 – a drop of 43%. In fact, the chart of global gas prices over time shows that Steinitz and his people chose to speak in cabinet roughly as local prices peaked.

This mistake may not be so significant to the economic analysis, since gas prices are volatile and in Israel they ought to be significantly lower than elsewhere because of the low transportation costs. But the manner of presenting the data shows that at least in some things, economic theory is incredibly accurate: As time passes, the regulator of any industry gradually becomes more and more a prisoner of its interests, until himself becoming its main tool to deceive and lull the public.