How Israel Has Killed Its Best Economic Opportunity in Decades: Leftists and environmentalists combine to usher in a new energy crisis.

The real cause of the plummet in investments is elsewhere. And to understand it we need to understand recent developments in the natural gas industry.

For nearly 60 years – from 1952 through 2011 – the regulatory situation in the Israeli energy sector was stable. By law, the state was to receive 12.5% of royalties on the sale of energy supplies developed by holders of development licenses, in addition to normal rate corporate taxes.

The regulatory situation was well suited to a market where costs of exploration and development are high and the chance of profits is low.

Opportunity costs also played a role in determining the investor-friendly license conditions. Due to the Arab economic boycott, companies that sign energy contracts with the Jewish state risk being denied energy contracts with the Arab states. And whereas the probability is low that an investor in Israel’s energy market will turn a profit, the probability of profits in Arab energy markets is high.

Read the article “Israel: Leftists and Environmentalists Usher in a New Energy Crisis” on jpost.com.