Netanyahu's Neglect of the Natural Gas Market Is One of His Government's Most Serious Failures

The Netanyahu government gave its blessing to the birth of the most powerful, threatening monopoly in Israel's history.

Offshore Leviathan natural gas drilling site.
Albatross

One of the most serious failures of Prime Minister Benjamin Netanyahu’s third government was its regulatory neglect of the natural gas market, which paved the way for the growth and establishment of the largest monopoly in Israel’s history.

The partnership of Delek and Noble Energy controls Israel’s most significant natural gas reserves – the Tamar field, which supplies gas to the entire economy through a single pipeline linking it to the mainland, and the Leviathan field, which is to be developed in the coming years. This situation assures the partnership monopolistic power for at least the next 40 years. The Sheshinski and Tzemah committees dealt with the taxation and export issues related to the gas, but in terms of antitrust issues, the state clearly chose to avoid confronting the partnership and preventing the formation of a monopoly.

A report submitted to the prime minister states that the absence of oversight on the prices charged by the gas monopoly has led to a 5-percent rise in electricity prices, which can be expected to continue rising steadily. This is monopoly rent that is being passed on to the public simply because of the powerful position of the gas fields’ owners. The state should have prevented this, or at the very least not ignored the problems that presented themselves with the signing of the partners’ first major contract with the Israel Electric Corporation in 2011. This agreement included drastic linkage mechanisms for the price of gas that assures a steady increase in gas prices, regardless of the state of the market.

The natural gas monopoly does not just affect the price of electricity, but the prices of water and food – and of all industries that use energy. How do members of the outgoing government have the nerve to promise their voters to deal with the high cost of living when none of them did anything about one of the biggest components of that cost?

The damage caused by this monopoly goes beyond the economic realm. Last week Deputy Attorney General Avi Licht published an urgent call to the government ministries and regulators, saying, “The market power this group represents raises concerns about the level of competition in this market and its consequences for consumer prices. But the problem is even broader. There is a fear of an economy-wide concentration of power. This is a fear that exceeds the questions of price and competition, and reaches into areas of possible influence on decision-making processes in the economy.”

Instead of proposals to eliminate VAT on food, the prime minister ought to be addressing those core issues that affect price levels, chief among them the gas monopoly. Israeli citizens who have been fed promises about energy independence don’t need to pay another monopoly tax because the state was negligent.