The Truth About Scotland’s Oil
Before we begin to talk about oil being the wealth of the nation you need to understand a few things.
The first thing to remember is that oil is a commodity, and like all commodities the prices fluctuate according to the demands of the market, pretty much like those of gold and silver. So if the price of oil drops below a certain price it becomes uneconomical to sell so is often held in reserve until the price picks up again.
So what causes oil prices to fluctuate?
World-wide oil production is controlled by OPEC – the Organisation of the Petroleum Exporting Countries, which aims to keep a stable price-per-barrel for crude oil. The price of oil is driven by global changes in supply and demand along with a number of other factors like wars, recessions and natural disasters, all of which can adversely affect oil prices. In 2005 Hurricane Katrina halted oil production along the Southern Gulf Coast of the US. As a result of this cut in supply and because demand remained the same, oil prices increased to over $70 a barrel. This caused the price of fuel and petrol to rise, so in order to bring the price of oil back down President Bush released 30 million barrels from the Strategic Petroleum Reserve (APR).
Between 2013 and the beginning of 2018 the price of oil fell from just over $100 to $60 per barrel, but it remains to be seen whether this is a permanent fall. Market analysts are predicting that Oil prices will stabilise at $60 per barrel, but given the history of oils notoriously volatile prices some are suggesting that it could soon see that price start to rise again and steady off at around $70 per barrel, especially as some of the older fields are now drying up and being decommissioned.
So Is Scotland’s Oil Running Out?
There are many rumours going around that oil in the north sea is running out, this is simply not true, it is a misconception invented by unionists to convince the people of Scotland that they will be worse off leaving the UK, they want you to believe that there is no future in North Sea Oil.
So let me not only dispel this rumour, but put it to bed once and for all. There is plenty of Oil left in the North Sea, with new fields being discovered all the time. But please don’t take my word for it, check out the links and see for yourselves. So when you are next told by someone that there is no oil left or that the oil is running out, politely inform them that just one of the new fields discovered is estimating yields of over 10 million barrels, so that field alone will keep us in oil for many years to come.
You can point out to these “scare mongers” that there are numerous new discoveries being made as well as lots of older ones that are yet to be developed. You can also if you wish, inform them that the “Oil & Gas Authority” has identified an extra 2.8 billion barrels in it’s projections to 2050.
The UK Governments failure to invest in an “Oil Fund” has cost the Scottish Nation dearly…
The failure by the Thatcher and subsequent UK Governments to set up an Oil fund like Norway and so many other countries have done has cost Scotland Billions of Pounds in lost revenue.
The Norwegian government created a sovereign wealth fund, so that the gains from North Sea oil could be enjoyed by future generations. The UK government thought it would be a better idea to use the revenue generated by Scotland’s oil to cut taxes, so ended up giving a big chunk of it away in tax breaks to Thatchers elite few.
Over the years Billions of pounds of Oil revenues have been squandered away by the UK Government with little regard for the future economy of Scotland.
If only 10% of North Sea tax receipts had been put into an oil fund starting in 1980 and continuing until 2008, and if the nominal return was only say 3%, the value of the fund would be over £24 billion per year, now add another 10 years to that investment and you would be looking at well over £30 billion per year, even taking into account the low oil prices of 2016/17.
So what was Scotland’s Oil Revenue spent on?
The truth is that no one can say for sure, the billions of pounds of oil revenues collected by the UK Government was put into the Westminster money pot and spent on many things including the afore mentioned tax breaks, one thing that we do know for sure is that Thatchers government didn’t re-invest any of it back into the Scottish economy.
An Interesting Fact…
Did you know that oil coming out of a well is measured in 42 gallon barrels. This is the old US barrel volumetric unit. However when oil leaves the oil fields, it is packaged in 55 gallon drums (English imperial barrel volumetric unit).
So 1,000 barrels would be 42,000 gallons of oil, which means that the transport would be carrying 764 barrels which would still be classed as 1,000 barrels. This is because the barrel used to measure oil production (42 gal) and the barrel used to transport oil (55 gal) are different.
So what is North Sea Oil currently worth to the Scottish economy?
Right now at this moment in time, virtually nothing at all, firstly because Corporate tax is not devolved to the Scottish Government so all that money goes straight into the pockets of the UK Government and secondly because the UK Government has given the oil companies some massive tax breaks over the last few years. In 2014/15 it lowered corporation tax on oil down to 50% and in 2015/16 it cut it right down to zero.
This not only affects GERS but also affects Scotland’s block grant, in other words the less revenue produced by Scotland the less the UK Government gives us back. In 2016/17 the plunge in global oil prices and the UK government’s decision to cut North Sea taxes and increase decommissioning subsidies meant Scotland’s share of oil revenues was only £208m – the second lowest figure since the 1970’s.
So taking all that in perspective, you can see why the UK Government wants to hang onto corporation tax, especially when it enables them to give these convenient tax deals to the oil giants. What they don’t want us to know is that these tax breaks came at the expense of the Scottish people.
Why Is Scotland’s Oil being used to Pay off the UK’s Debt?
When you look at GERS you will see that there is an expenditure line labelled “Public Sector Debt Interest” in 2011/12 (when oil was at its peak of over $100 per barrel), this amounted to well over £4 billion, I asked myself “how could that be when Oil was making us so much money”, so I decided to take a closer look at these figures. Upon closer study I found that over the past 30 years or so the UK government had deducted from Scotland’s block grant a percentage share of Westminsters debt interest which according to available data totalled over £64 billion, yet over the same period according to HMRC, Scotland’s oil had generated over £116 billion of revenue through corporation tax alone.
So I ask you, Why is Scotland apportioned a population share of the UK public sector debt interest and why does a country rich in oil have to pay interest on a debt it doesn’t own? No other similar sized country with a strong and growing economy and the additional bonus of a large and well established oil and gas industry is burdened with such payments.
In short Scotland is now and has been for over 30 years, paying for the rest of the UK’s debt. That’s like paying the interest on your neighbours house, car and bank loans just because you earn more than them and they want to spend money that they don’t have..
Supporting Documents & Links to More Information (opens in new window)