The Economic Costs of the Israeli Occupation for the Palestinian People: The Unrealized Oil and Natural Gas Potential

Geologists and natural resources economists have confirmed that the Occupied Palestinian Territory lies above sizeable reservoirs of oil and natural gas wealth, in Area C of the occupied West Bank and the Mediterranean coast off the Gaza Strip. However, occupation continues to prevent Palestinians from developing their energy fields so as to exploit and benefit from such assets. As such, the Palestinian people have been denied the benefits of using this natural resource to finance socioeconomic development and meet their need for energy. The accumulated losses are estimated in the billions of dollars. The longer Israel prevents Palestinians from exploiting their own oil and natural gas reserves, the greater the opportunity costs and the greater the total costs of the occupation borne by Palestinians become.

This study identifies and assesses existing and potential Palestinian oil and natural gas reserves that could be exploited for the benefit of the Palestinian people, which Israel is either preventing them from exploiting or is exploiting without due regard for international law.

Identifying and quantifying the economic loss to the Palestinian people of being denied their natural right to develop and exploit their natural resources extends beyond oil and natural gas resources. The focus of this study, however, is confined to these two resources, in the light of their high value and their critical importance in potentially meeting basic Palestinian needs for energy and export revenues. Also critical are the new oil and natural gas finds in the Eastern Mediterranean that Israel has begun to exploit for its own benefit, while these resources may be considered shared resources, whereby the oil and natural gas exist in common pools. The use of and benefits from these resources should be governed by the same rules and norms that apply to other common resources.

The disputes and tensions involving oil and natural gas cannot be separated from the political context that surrounds them, and the fact that the period when the natural gas discoveries were made coincided with a number of important political developments in the region. The political context intersects at many crucial junctures with the oil and natural gas resource developments and thus complicates an already complex political situation. Ignoring these complexities can only rob the analysis of many crucial determinants.

Several defining characteristics of oil and natural gas separate them from other natural resources.

  1. they do not follow political borders and can therefore coexist with and straddle multiple national borders.

  2. they take several millions of years to accumulate underground, such that the current generations of owners are not necessarily either the only or the legitimate owners.

  3. they can be stored at zero cost for decades, centuries and even millenniums. Typically, their economically optimal exploitation depends, in part, on whether the interest rate exceeds the expected price increase.

  4. they may be part of the global commons, where efficiency and equity considerations require their unitization and common exploitation.

  5. they are nonrenewable resources, any exploitation of which at any time reduces what is available for future generations.

The new discoveries of oil and natural gas in the Levant Basin, amounting to 122 trillion cubic feet of natural gas at a net value of $453 billion (in 2017 prices) and 1.7 billion barrels of recoverable oil at a net value of about $71 billion, offer an opportunity to distribute and share a total of about $524 billion among the different parties, in addition to the many intangible but substantive advantages of energy security and cooperation among long-time belligerents. They can also potentially be a source of additional conflict and violence if individual parties exploit these resources without due regard for the fair share of others. What could be a source of wealth and opportunities could prove disastrous if this common resource is exploited individually and exclusively, without due regard for international law and norms.

Several schemes of alternative property sharing methods are identified in this study, anchored in the historical property rights of the parties and recent agreements. The utility of these identified shares is that they are grounded in history and mutual agreement. These shares could serve as background for a negotiation framework.

The exploitation of Palestinian natural resources, including oil and natural gas, by the occupying Power imposes on the Palestinian people enormous costs that continue to escalate as the occupation remains in effect. This is not only contrary to international law, but also in violation of natural justice and moral law. To date, the real and opportunity costs of the occupation exclusively in the area of oil and natural gas have accumulated to tens, if not hundreds, of billions of dollars.

This study concludes by emphasizing the need for further detailed economic, historical and legal research, guided by international law, to ascertain property rights related to oil and natural gas resources. It therefore recommends detailed studies to clearly establish the Palestinian people’s right to their separate natural resources, as well as their rightful share in the common resources collectively owned by several neighbouring States in the region, including Israel.