Israel Set to Join the Rich Countries Club

From Israel, the good news—and it is huge—is that Israel will soon be awash in natural gas. Gas discovered on the country's outer continental shelf will turn the country from being hydrocarbon-deprived to being a net exporter.

Indeed, Israel is set to become so rich that it's laying the groundwork for creating a sovereign wealth fund for overseas investments in order to protect the country from inflation and the shekel from getting too strong.

The bad news is that, with Hezbollah poised to control Lebanon's government, Iran has de facto arrived on Israel's northern border. Even without an Iranian nuclear weapon, this is a grave deterioration in Israel's security.

Already Lebanon has asked the United Nations to guarantee that Israel does not violate the integrity of Lebanon's outer continental shelf, where Iran plans to help Lebanon drill for gas.

Geology is about to change the political geography of the world's most combustible neighborhood.

The two huge gas discoveries are in the Tamar and Leviathan fields. Together, the gas reserves are estimated at 26 tcf, or 10x larger than Britain's North Sea discoveries.

Since its creation in 1948, Israel has drilled on land for oil and gas with very little success. While the Arab Gulf countries have found and produced massive quantities of oil and gas, Israel has scrounged in the international markets for its hydrocarbons, including coal. In recent years, it has bought gas from Egypt. But Egypt will lose its good customer.

The Tamar field is 50 miles off the Israeli coast, and the gas will change the country. Its defense force will have to defend the gas installations and the miles of pipes, pumps and other infrastructure. Israel has no domestic heating market, so all the new gas bounty will go to electric generation.