A green light unto the nations

Lyon Roth

Israel can play a leading role in curing the West of oil addiction.

I will make with you a covenant to be a light unto nations Isaiah 42:6.

Jews have long been identified as divinely selected to serve as a light unto nations. Democratic ideals, fidelity to justice, the rule of law and essential dignity of the human person are just a few examples of that model. Interestingly, so is the first known environmental protection exhortation -- to respect the planet and its resources. Specifically, the Torah commands do not destroy trees by swinging an axe against them, for from them you will eat. Deuteronomy 20:19.

Israel has been associated with environmental conscientiousness since the creation of the modern state 62 years ago. Around the world, awareness has also expanded as we consume resources, particularly fossil fuels, at alarming rates. Last week, the world celebrated its 40th Earth Day and, while some scientists may debate global warming, the felicitous objective of enjoying a greener planet is universally agreed upon. Moreover, major geopolitical factors have also entered the equation as much of the worlds oil and natural gas reserves are controlled by rulers hostile to the values described above.

Western civilization and the price of oil

Today, oil trades around $80 a barrel. This is more than double what it cost at the end of 2008, yet only about half of the high reached six months prior in July 2008. Clearly, oil is a volatile commodity. Tragically, it is also one that the world has become addicted to. I submit that the more important figure is the price of the last barrel of oil. Carried to the extreme, that price is binary: the last barrel will cost either $0 or $infinity. If we approach the latter price, we will concomitantly approach the end of western civilization. Therefore, we must dedicate massive resources to reach the former price, where oil becomes the oleaginous, messy, valueless liquid that it was before the industrial revolution.

Who will lead that effort? In response to the energy crisis generated by the Arab embargo in 1973 (following the Yom Kippur war), it looked like America along with Israel - would blaze that trail. Israel was a natural pioneer for this research. Passive solar home design, blocking/capturing heat during the day and releasing it at night, was embraced by Israeli architects as early as the 1970s and over 50% of domestic hot water has been produced by solar energy since the 1950s.

In fact, by the 1980s, Luz, an Israeli-American company was generating 95% of the worlds solar energy. Their first project was a 12.5 MW electricity-generating power station at Dagget, California, followed by six 30 MW power plants, employing a larger size solar collector unit. Ultimately, Luz erected two 80 MW power stations using even larger solar collector units. All of these plants are still operational, over 20 years later.

But in the mid-1980s oil became cheap again. Saudi Arabia increased the flow and the Reagan administration applauded the initiative. The US knew that the worlds second largest oil exporter was the Soviet Union and that low oil prices would cripple its economy. Mired in Afghanistan (Americas turn would come a quarter century later) and stretched thin to support failed satellite dictatorships around the world, the USSR relied heavily on its oil export revenues. As prices crumbled, so too did the Berlin Wall and, ultimately, the entire Evil Empire.

Thus the West won the Cold War, sometimes referred to World War III. Can it use a similar strategy to win World War IV, currently being waged against radical Islam financed by petro-dollars? I believe we can. But the Saudis wont be our allies this time, nor will any other entity whose economy is fueled chiefly by oil exports. Today, the only way to make oil cheap is to make it useless.

The presidents recent drilling compromise received a lot of attention. In my view, it is a side-show. Even if America succeeds in increasing its share of the planets proven reserves from 3% to 4, 5 or even 10% (which is extremely unlikely), thats a proverbial drop in the barrel as the US continues to consume 25% of the worlds production. Drilling may delay the inevitable, but it doesnt eliminate the addiction. A heroin addict that plants poppies in his backyard is still an addict. Moreover, few addicts ever act in ways that alienate their dealers, which in our world are the dreadful oil exporters. Therefore, the only responsible rationale for increased drilling is to buy more time to develop alternative energy solutions.

Clearly, China understands that. It is busy securing oil drilling concessions from countries across Africa and Latin America and has surpassed the US as the chief importer of oil from Saudi Arabia. Yet, simultaneously, China is also investing massively in green technologies. The country is now the worlds largest manufacturer of photovoltaic solar panels and at the vanguard of developing a domestic electric car industry. Warren Buffet believes one company, BYD, knows what it takes to make China a better place and last year invested $230 million for a 10% stake in the company. Perhaps Buffet thinks Wang Chuan-Fu, BYDs founder and chairman, means Shai Agassi in Mandarin.

Bright lights in Israel

These enterprises are critical if we are to reduce and, hopefully, eventually eliminate our dependence on oil. Better Place has already signed deals on five continents that want to move towards battery-powered electric cars. They also just raised another $350 million and progress has been impressive on all fronts. Additional cities, states and countries have clamored to be included and the company cant handle even a fraction of the enthusiasm. According to Michael Granoff, Head of Oil Independence Policies for Better Place, a critical question is how will the anticipated hunger for electricity be satisfied? Were working closely with renewable energy companies, particularly in Israel, to ensure that Better Places success also inures to the benefit of companies expanding grid capacity with clean-tech solutions.

Today, renewable sources like solar, wind, geothermal, biomass and hydro play a negligible role in the overall mix. However, the technologies are improving, especially abroad. While oil was cheap, US drivers paid less at the pump. Europeans did not. Most European countries taxed gasoline and, in my view, thus encouraged European companies to identify renewable energy solutions. Germany, Spain and the Nordic countries have been illuminating the path to non-oil dependent technologies and entire towns in Denmark are now powered by alternative energy sources.

Thankfully, Israeli companies are also playing a role. Luz went bankrupt in the 1990s, shortly after constructing the California plants, a victim of investment dollars run dry. However, Luzs two major corporate successors remain leaders in concentrated solar power. Solel, which employs the next generation of Luz parabolic troughs for its solar thermal power plants was acquired last October by Siemens for $418 million. And BrightSource, founded by several former Luz engineers, just received $1.4 billion in US federal loan guarantees to construct three separate utility-scale solar thermal units in California that will generate 400 MW of electricity. Thats enough to power 140,000 homes and will nearly double the amount of solar thermal energy produced in the US today. According to Professor David Faiman of Ben Gurion University, whoever invests in Israeli solar initiatives today is likely to be included in the next generation of soligarchs.

US debt fuels Islamic militants

Lets think about what the true price of oil is for America and the rest of the free world. If oil had no value, would we be grappling with the question of a nuclear Iran? Would Hamas, Hezbollah and other terror-based organizations be viable without any petro funding? Would the burgeoning number of Wahabi-financed hate-preaching madrasas continue to flourish? Would Al-Quaida even exist?

The United States has already spent over $1 trillion on the wars in Afghanistan and Iraq, and theyre likely to be there for a while. America imports about $300-500 billion a year in foreign oil and borrows over $2 billion every day to finance these expenditures. The national debt is over $12 trillion and rising. Unless our creditors all embrace the Korans prohibition against riba, the charging of interest on loans, America wont get out of its economic jam until it gets out of its fossil fuel addiction. I believe that the West still has a green light. But we must hurry forward before it turns dark.

Lyon (Lenny) Roth is a senior executive at an international wealth management firm and a member of Ben Gurion University's Board of Governors.

Published by Globes [online], Israel business news - www.globes-online.com - on April 28, 2010

Copyright of Globes Publisher Itonut (1983) Ltd. 2010

Lyon Roth

 
Lyon Roth
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