Palestinian Authority silent as Israel consolidates fuel monopoly

Israel exercises exclusive control over the distribution of fuel to the occupied West Bank and Gaza Strip.

Ashraf Amra APA images

“There’s no money in this job — everything I earn goes to pay for gasoline,” a Ramallah cab driver laments, while hurtling down a street on the outskirts of the occupied West Bank city.

Cab drivers are not the only ones who have felt the pinch of rising gasoline prices in the West Bank. The price of basic foodstuffs — maize, vegetable oil and bread — is higher than ever, after rising steadily since 2011.

The West Bank is feeling the effects of a global hike in the price of oil — and consequently, most everything else. Meanwhile, the Gaza Strip has spiraled into an acute phase since smuggled Egyptian gasoline has slowed to a trickle and the Hamas-led government in Gaza has been forced to resume obtaining expensive fuel from Israel.

Israel exercises exclusive rights over the supply of fuel to the Palestinian population, despite the fact that the West Bank and Gaza Strip should be able to import cheaper petrol from oil-rich neighbors and alleged allies, or tap into gas reserves off the coast of Gaza.

The expensive — and in the case of Gaza, sparse — gasoline is a consequence of Israel’s control that has yet to be challenged by the Ramallah-based Palestinian Authority. According to the Oslo agreements, the PA is obliged not to sell its gasoline for less than 15 percent of Israel’s market price.

According to Charles Shamas, a founder of the Mattin Group, a Ramallah-based research and advocacy organization, Israel’s monopoly on supplying fuel to the West Bank is used as part of a conscious strategy aimed at maintaining Palestinians’ structural dependence on Israel and its political decision-makers.

“Such supply monopolies are a form of power. They provide easy ways to exert political pressure on the Palestinian Authority and ordinary Palestinians and to enforce their compliance with Israel’s interests,” said Shamas.

Gaza subjected to chronic power shortages

Gaza has felt the powerful flexing of Israel’s strategic muscle, being subjected to arbitrary electricity cuts and a constant power shortage as a result of Israel’s insufficient rationing of fuel permitted to enter the coastal strip at levels far insufficient to meet the needs of its 1.6 million inhabitants.

It is through this lens that Shamas sees the failure to develop Gaza’s offshore gas fields, discovered 13 years ago.

“The gas field issue was initially welcomed in the hope that it would give [the West Bank and Gaza Strip] a greater measure of independence,” Shamas explained.

Discovered in the 1990s by the British Gas Group, Gaza’s gas fields are estimated to be 1-1.4 trillion cubic feet in volume. While this amount appears small compared to the energy reserves of Gulf neighbors, it is substantial enough to meet Palestinian domestic needs for the next 15 years.

Since British Gas conducted initial studies and concluded the fields were financially viable, there has been an agreement between British Gas, the Palestine Investment Fund and a firm called Consolidated Contractors Company to develop and commercialize the fields.

No extraction

Yet 13 years after plans to develop the fields were drawn up, not a single gallon has been extracted.

“Developing Gaza’s gas fields would break one important Israeli supply monopoly. They don’t want the Palestinians to develop energy self-reliance,” Shamas said.

Victor Kattan, author and program director of the research group al-Shabaka, recently revealed that despite rumors circulating as recently as 2011 that Israel was still in negotiation with the PA over the terms of their drilling off Gaza’s shore, all talks stopped in earnest in 2007 (“The Gas Fields off Gaza: A Gift or a Curse?”).

During Kattan’s own investigation, he discovered through a source at Consolidated Contractors Company that plans hit an insurmountable obstacle after Israel would not allow Palestinians access to their own gas fields before they promised to sell it to Israel at a significant markdown from global prices.

Israel is expected to have a source of fuel from the Tamar gas field — about 80 kilometers off of the coast of Haifa — in 2012, so this intransigent stance appears to be rooted in a political desire to maintain control, rather than a need to secure cheap gas.

“For some time Israel has effectively said to [the Palestinian] business community, ‘We want you to do business, but not without us.’ Monopolizing access to business opportunities is another means of control that costs Israel nothing,” Shamas said.


Omar Shaban, an economist based in Gaza, calls the subject of Gaza’s gas fields a “black book” due to the lack of transparency of the Palestine Investment Fund — and how little information is known about it. The PIF is a venture capital firm established in 2003, purportedly to help stimulate economic development in the West Bank and Gaza Strip.

As long as Israel has a monopoly on the supply of fuel, it can restrict the amount delivered. The Israeli petroleum company Dor Alon currently owns exclusive rights for delivering fuel to Gaza. Acting under direct orders from Israeli authorities, Dor Alon delivers only what the Israeli government permits to Gaza, which is far below what the population needs.

This enforced and often crippling dependence imposes daily power cuts on the Gaza Strip and foists Palestinians in Gaza into situations of genuine peril. While the dangers are less immediately apparent in the West Bank, the functioning capacity of the economy is significantly undermined by the high price of Israeli fuel.

Need to diversify

Shamas believes it is important to diversify fuel supply sources in the West Bank and Gaza Strip in order to begin a process that would enable Palestinians to reduce, and eventually escape, Israel’s control over such a basic necessity in everyday life.

Until February 2011, the Hamas government had successfully demonstrated the benefits of breaking the Israeli monopoly. Shaban explains that Hamas was able to operate Gaza’s only power plant entirely on smuggled fuel from the Sinai and satisfy nearly all needs for fuel at a considerable price reduction.

With smuggled fuel in Gaza, drivers were paying 1.5 shekels (40 cents) per liter as opposed to 7 shekels ($1.84) in Israel and the West Bank.

During that time, nearly 600,000 liters of fuel were smuggled every day, meeting 80-90 percent of the population’s needs, Shaban has estimated.

“This was much more bearable than when we depended on the Israelis,” he said.

But all that ended when Egypt clamped down on smuggling activities in the Sinai more than a year ago.

Now Gaza has been forced back to obediently receiving its daily quota of fuel from Israel. Recent reconciliation talks between Hamas leader Khaled Meshaal and Mahmoud Abbas, the PA president, have led to an agreement that the PA would resume paying Israel to deliver fuel to Gaza.

While it is clear that the Palestinian population would benefit from procuring its fuel from a third party, the PA until now seems unwilling to pursue such possible options. Moreover, why the PA so quickly and quietly folded while holding the rights to an independent source of fuel is equally — if not more — perplexing.

However, Shamas is hopeful for a sea change in the near future. “There’s increasing readiness and capacity to admit and confront the political reality,” he said.

Editor’s note: due to an editing error, statements in this article were inadvertently attributed to Charles Shamas rather than Omar Shaban. The article has been corrected.

Charlotte Silver is a journalist based in the West Bank. She can be reached at charlottesilver A T gmail D O T com.