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“That is beautiful product.”

Harold Vinegar is holding a little vial of oil, light-brown in color, with a look of paternal pride. “It’s much lighter than typical crude,” he says, describing it as “the equivalent of Saudi extra-light.”

Maybe somewhere else this would be no big deal. But this is Israel—a country that’s been drilling dry holes for six decades in a famously fruitless quest for oil. And the liquid Mr. Vinegar is holding has been extracted from a nearby deposit of shale oil, which Israel has in abundance.

What kind of abundance? The World Energy Council estimates Israel’s shale deposits, located some 30 miles southwest of Jerusalem, could ultimately yield as many as 250 billion barrels of oil. For purposes of comparison, Saudi Arabia has proven reserves of 260 billion barrels. The United States consumes about seven billion barrels a year.

Mr. Vinegar works out of a small Jerusalem office for a start-up called Israel Energy Initiatives (IEI). Until recently he was a chief scientist at Shell in Houston, with a remarkable 266 patents to his name. Many of those patents are connected to his quest to develop “unconventional” energy sources such as shale (a grayish sedimentary rock) that are abundant in North America but pose major technological hurdles and are uneconomical to extract when oil prices are low.

Shale is much in the news in the U.S. thanks to discoveries of huge natural-gas resources—estimated at 2,500 trillion cubic feet—in our own shale rock that can be extracted by a newish version of a method called hydraulic fracking. And natural gas is much in the news in Israel, thanks to the discovery last year of a major offshore deposit estimated at around 16 trillion cubic feet.

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Bret StephensDrilling for shale oil in Israel.

Yet shale does not only contain natural gas. The U.S. is thought to have 1.5 trillion barrels of shale oil, while China has some 355 billion barrels. Israel ranks third, just ahead of Russia. Most of the U.S. deposit is in Colorado, where Mr. Vinegar spent much of his career perfecting various techniques that involve sinking electric heaters into the ground, warming the shale for as long as three years, and then extracting the oil that’s released, roughly as one would from a regular well.

But there’s a problem with the Colorado resource: “In Colorado the aquifer runs right through the oil shale,” says Mr. Vinegar. One advantage of Israel’s shale, he explains, is that the aquifer runs several hundred feet below it. A second advantage is the richness of the deposits, which he believes yield between 23 and 25 gallons of oil per ton of shale. A third is Mr. Vinegar’s estimate of $34-$40 per barrel cost of commercial production—roughly comparable to the cost of deepwater drilling today.

Mr. Vinegar thought there would be one more advantage to working on shale extraction in Israel: Less bureaucracy, more can-do. But nimbyism, the permitting rigmarole, and a powerful environmental lobby are facts of life in Israel too, and Benjamin Netanyahu’s government hasn’t helped matters by jacking up taxes on energy companies now that sizable resources have been discovered.

For now, all this is far afield for IEI, which is still waiting on a permit for its first pilot project. Beyond that lie years of lead time and billions in investment to bring the project to commercial scale. The history of oil prospecting, even when the technology is right and the resources proven, abounds with failures. This could well be one of them (a point I hasten to underscore since Rupert Murdoch, chairman of this newspaper, has a 0.5% stake in Genie Energy, IEI’s U.S.-based parent company.)

But regardless of whether IEI is destined for rags or riches, its efforts raise important issues about both Israel’s and the world’s energy future.

Israel currently imports nearly all of its oil by tanker, mainly from Russia and the former Soviet republics. Those imports were abruptly cut off during the 2006 war with Hezbollah, which brought the country perilously close to running out of fuel. More recently, there has been talk in Egypt of raising the price on its natural-gas supplies to Israel and perhaps cutting it off entirely. Energy independence may be a chimera for the U.S. For Israel, some measure of independence is a strategic imperative.

As for the rest of the world, it is steadily depleting its reserves of conventional oil even as demand continues to skyrocket. Biodiesels and other enviro-fads will not make up the shortfall. But unconventionals could, provided we get over our hypochondria about exploiting them and our illusions about downside-free sources of energy. At least there’s no question about where the shale deposits lie.

There would be much surprise—and some justice—if Israel were someday to become the Mideast’s newest energy giant. Then again, who would have predicted a decade ago that Iraq would be the Arab world’s first democracy? The Middle East always retains its capacity to shock—and sometimes even delight.

Write to bstephens@wsj.com

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