North Sea Oil and Scottish Independence: where does the truth lie?

  • How much oil and gas is left in the North Sea? 16 billion barrels oil equivalent (boe) according to Sir Ian Wood or 24 billion boe according to Oil and Gas UK? The correct answer for official proved+probable reserves is between 8 and 9 billion boe, a figure that both DECC and Oil and Gas UK agree on. With over 9 different classes of reserves, this debate is sterile and this is not the correct question to ask.
  • How wealthy will oil make Scotland? In 2013, the direct tax take from oil and gas production for the whole of the UK was £4.67 billion and falling. This compares with annual spending of the Scottish government (plus UK spending on Scotland) running at £65.2 billion. Hence, direct taxation of oil and gas production may account for less than 7% of the Scottish budget. What we should be asking is where the other 93% is going to come from?

On 18th September this year people resident in Scotland be they Scottish, English, Irish or Polish will vote on Scotland’s continued membership of The United Kingdom. The debate is heating up. Oil magnate Sir Ian Wood suggests that remaining oil and gas reserves are about 16 billion barrels oil equivalent (boe). While industry representative Oil and Gas UK suggest a figure of 24 billion boe, a figure preferred by the pro-independnece lobby. As discussed below, both of these numbers as they stand alone are totally meaningless.

Voters are clearly confused and are pleading for real data upon which to base this most crucial of decisions. In this post I attempt to bring some reality to the debate about North Sea oil and gas reserves, production and finance.

Reserves Figures are a Sterile Debate

The Society of Petroleum Engineers provides a framework for the classification of reserves based on class and certainty [1]. There are three classes and three certainty levels giving at least 9 different classifications of reserves (Figure 1). And so, when a number of 24 billion boe is reported it is essential to qualify this with the classification terms. Are these 2P reserves? i.e. oil and gas known to exist with a high degree of certainty. Or are they 3P reserves + resources, i.e. oil and gas optimistically hoped to exist, but  yet to be discovered or a means of production economically worked out.

Figure 1 Classification of reserves according to The Society of Petroleum Engineers. The industry standard is normally to report 1P or 2P reserves (the middle of the green band).

Figure 2 UK North Sea reserves estimates from various sources [2]. The 2P figures from the Government (DECC) and Oil and Gas UK are actually closely aligned at between 9 and 11 billon boe oil + gas (updated to 8 to 9 billion boe). See note at the end of this section). With over 42 billion boe already produced it seems likely that 80% of UK oil and gas is already gone.

A year ago I conducted a review of reserves from different sources including my own back of the envelope calculation using industry standard methodology [2] (Figure 2). There is a degree of agreement where the proved oil and gas reserves category lies somewhere between 4 and 5 billion boe. Proved + Probable (2P) reserves stand at around 8 billion boe according to DECC [3] and about 9 billion boe according to Oil and Gas UK [4] (see note at the end of this section). How these figures become inflated to 16 and 24 billion is pure speculation.

Oil and Gas UK qualify their numbers with the need to spend £1 trillion to get their high end estimates out of the ground (Figure 3). Considering that current investment levels are running at around £20 billion per year it will take 50 years to reach that target. Most of the existing infrastructure will have fallen into the North Sea long before. Production growth is now negatively correlated with investment (Figure 4) and one needs to ask the question how likely it is that the industry will sink another £1 trillion into this ageing, mature province? It is of course Oil and Gas UK’s business to talk the industry up.

Figure 3 Excerpt for Oil and Gas UK’s 2013 financial report revealing how they get from 7.4 to 24 billion boe [4].

Figure 4 Despite rising and record levels of investment in the North Sea, oil and gas production has continued to decline [5].

At the current mature stage of North Sea development, oil price is vitally important. With Brent approaching $100 / barrel, companies in Aberdeen are preparing for recession. There are of course bright spots like Clair, Mariner and Laggan Tormore. But there are many black spots where companies can no longer afford to maintain rusting platforms producing a mere dribble of oil. The UK industry currently needs sharply higher oil prices to prosper.

[Note added 17:00, 25th August. I received a few emails from DECC providing more up to date figures than the ones I was using that were complied last December:

Last year we said P+P reserves were 8.9 billion boe. Which I guess explains where your 9 billion boe comes from. Oil & Gas UK were at 9.9 billion boe so I don’t see why you say between 9 and 11 billion boe. It would be more accurate to report DECC’s current estimate of 8 billion boe and Oil & Gas UK’s of 10 billion boe.

Oil & Gas UK now say 9.4 billion boe (see attached) so the range should be 8 to 9 billion boe rather than 9 to 11 billion boe.

The numbers in the post were therefore revised accordingly.]

The Harsh Reality of Production Decline

Combined UK oil and gas production peaked in 1999 (Figure 5). We have now experienced 14 years of relentless decline. This is not speculation but a fact. Production today is 32.4% of the 1999 peak value. Decline is a feature brought about by the depletion of reserves and pressure. At first a field will produce dry oil. But with the passage of time increasing amounts of water are produced with the oil. The industry fights decline 24/7. But it is rather like swimming upstream in a river against a strong current. You may want to get upstream but the current relentlessly wants to drag you down.

There are signs that declines are being stabilised for the time being. This has been brought about by record levels of investment that will not be maintained at current prices [5]. Some large new fields due to come on stream in the near future may arrest or temporarily reverse the long-term decline picture. But all of the fields represented in Figure 5 will still be there pulling production down.

Figure 5 The history of UK oil and gas production according to the 2014 BP statistical review of world energy.

With over 42 billion boe already produced from the North Sea [4], it seems likely that about 80% of the producible oil and gas has already gone. The industry will of course continue for many decades, but on current data it will be at a much lower level than in the past. However, one can never discount a new oil and gas province being discovered in the waters to the west.

The Financial Reality

Direct taxation of the UK oil and gas industry since 1968 is shown in Figure 6 [6]. Direct taxation is in the form of a Petroleum Revenue Tax and Corporation tax that oil and gas operators pay at a higher rate than other companies.

In 2013 the total UK direct tax take from Oil and Gas was £4.67 billion [6]. In 2012/13 total UK and Scottish Government expenditure on Scotland was £65.2 billion [7]. 9.1% of the UK total even though we have only 8.3% of the population. Hence direct tax revenues from oil and gas will amount to less than 7% of the total Scottish budget (the North Sea oil tax figure is for the whole of the UK). Important to be sure, but not nearly as important as the 93% (£60.6 billion) that will have to be found from other sources.

Figure 6 Data for total direct taxation of the UK oil and gas industry [6]. The roller coaster ride in tax income comes down to a combination of production rise and fall, oil and gas price rise and fall, changes in operating costs and changes to the taxation regime. The current environment is one where oil prices have more or less traded side ways since 2008, production has continued to decline and operating costs have gone through the roof. The industry in Aberdeen is preparing for a new cyclical recession. Contractors are being laid off or their rates cut and the operating companies are preparing to lay off staff.

Whilst important, the direct tax take from North Sea oil is by far NOT the most important aspect of the industry to the Scottish economy. The benefits to the economy comes from the economic activity that the oil industry creates. It creates jobs directly in the operating and service companies and in the supply chains. In 2012 this expenditure amounted to £22 billion spent on goods and services, not all of it spent in Scotland. A large amount is spent on salaries to people living in Scotland who then spend this money in local shops, pubs and restaurants. It is true that the tax revenue generated from this activity is shared with the whole of the UK. But it is the economic activity itself that is most important, and this already exists in a Scotland that is part of the UK.

Of similar importance is the fact that Scotland is now a hub for hemispheric oil and gas activity. US companies, based in Scotland, may employ staff here servicing the oil industry in Algeria, Azerbaijan or Nigeria. These companies want stability and certainty to continue their business in an increasingly uncertain world. Similarly UK (Scottish) companies that grew out of the North Sea oil boom like The Wood Group serve the global industry providing jobs and prosperity to Scotland. These companies too want fiscal and currency certainty looking forward. The focus on ethereal reserves is a mistake, the focus on direct tax income is a mistake. The focus should be on the continued  existence of a multi-billion £ industry that provides jobs and prosperity for many and a single minded focus on doing nothing that may jeopardise the present or the future.


[1] SPE: Guidelines for Application of the Petroleum Resources Management System

[2] Energy Matters: UK oil and gas reserves

[3] DECC: Oil and gas: field data

[4] Oil and Gas UK: Economic report 2013

[5] Energy Matters: UK North Sea Oil Production Decline

[6] HM Revenue and Customs: Statistics of Government revenues from UK oil and gas production

[7] The Scottish Government: Government Expenditure & Revenue Scotland 2012-13

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23 Responses to North Sea Oil and Scottish Independence: where does the truth lie?

  1. Glen Mcmillian says:

    ”. The current environment is one where oil prices have more or less traded side ways since 2008, production has continued to decline and operating costs have gone through the roof. The industry in Aberdeen is preparing for a new cyclical recession. Contractors are being laid off or their rates cut and the operating companies are preparing to lay off staff.”

    I am not well enough informed about current politics on your side of the pond to understand the reasons in depth for the independence movement but I have read a lot of Scottish , Irish, and English history and the roots of this issue definitely go back many centuries.The vote is apparently going to be close and it may actually turn on tax issues but history is the big factor for sure.I am much more interested in this history myself than most Yankees being of Scots Irish ancestry.Legend has it that my great grand four times removed father arrived here so poor that the only thing he had to do to move was pxxs (urinate) on his campfire.In other words he had nothing except whatever he was wearing.

    The quote above is indicative of my reasoning that the UK as a whole better be thinking long and hard about what the country is going to be doing for energy within a few more decades. All that hoped for oil and gas that is supposedly out there to be had for the tracking of it may be there. It may not. The principals here seem to be mostly engineering types. You ought to know about running risks and taking chances on such things. I doubt any of you would design a bridge that has a twenty five percent chance of collapsing over the expected service life of the bridge.

    IF you can’t get a huge fleet of nukes built you better be investing as much as you can manage in efficiency which is what you should have been doing all along of course instead of building the renewables you have already. That would have paid a much more substantial return per dollar or pound invested so far.And you can be working on straight up conservation as well- which is tougher because conservation as such generally means a sacrificial change in lifestyle such as lowered thermostats and more buses and fewer cars.

    BUT if you cannot manage to build a huge new fleet of nukes you have no choice except to either go with renewables or go without to a substantial extent.I can’t see the nukes getting built soon enough and in numbers great enough and I am a close follower of the politics of nuclear power and a nuclear power advocate myself.

    It is obvious from reading this blog that a lot of money has been spent unwisely on your existing renewable infrastructure but this is to be expected. Governments are very poor managers of money and generally fail to see that it is well spent when setting out to bring about substantial change.Take comfort in the fact that this money was not spent on welfare or new football stadiums or more highways which will be very lightly used in a few more decades given the reality of future oil supplies.

    When you go on holiday and spend a few thousand pounds the souvenirs you bring back are the only tangible benefits- the new piece of art work will bring you pleasure for as long as you live. The drinks and food are only memories.The sights you have seen are only memories.The new pipe or new shoes or new camera you bought for the holiday have some lasting value.

    It is possible to learn to live with intermittent renewable power and doing so will be easier than living without fossil fuel power when fossil fuels are unobtanium someday.

  2. Glen Mcmillian says:

    No matter how much these things cost today- the price of them will come down substantially as more of them are built and the business of building and installing them matures.

    AND nobody can cut off imports of tidal power or intercept and sink ships that are not enroute. Tidal power will be intermittent but at least highly predictable and we can learn to make it work. Used to heat a house for instance it will work ok if the house is very well insulated. My old farmhouse is not too good in that respect but if once warmed up it will stay reasonably warm for four hours on a very cold day if I don’t go in and out much even if I turn off the heat. A new house built to modern standards would stay warm enough to get by ok for twelve hours or more without any additional heat and if a heat reservoir were added such as a couple of tons of brick heated with plentiful peaking power it could go twenty four hours easily.Adding in that much masonry or just crushed stone would not be hard or expensive when building a new house.

    AND people will modify their habits to charge the battery electric cars they will be driving in another couple of decades or less to take advantage of tidal power production.I am personally convinced that the battery industry is still in short pants in terms of future costs and long term reliability and that a pure electric car with a hundred mile range that will be extremely cheap to operate compared to a conventional car will sell for a price that is no higher or only a little higher than a comparable conventional car within ten to fifteen years.Paying a little more given the savings on routine maintenance will be a bargain by then when also considering future gasoline prices.

    • Sam Taylor says:


      I feel I should correct you as regards nuclear. It’s one of the few industries in which the cost of producing plants has not come down with time, if anything it appears to be getting more expensive. The reasons for this are uncertain (safety concerns changing? Tighter regulation?) but alas it is what it is.

      • Euan Mearns says:

        I think the cost of all power generating / large engineering kit has gone up a lot and this is due to the 5 fold increase in the price of oil 2002-2008. Time lags in the system for these price rises to work their way through the supply chain. Nuclear can also be impacted by over zealous safety regulations that also impact the cost of N Sea oil production and abandonment. The cost of wind turbines actually rose a lot in this period to fall back a little in recent years. Solar PV alone may have come down in price with fierce (subsidised?) competition from China.

        • Sam Taylor says:


          It’s been a long term trend, unfortunately. I saw a lecture a while ago, I forget where, and the speaker was talking about how generally the cost of production of some industrial unit tends to fall in step with a power law called Wright’s law, named after one of the Wright brothers, who noted decreasing cost of production with time. He brought nuclear up as one of the examples of a technology which has never followed Wright’s law throughout it’s history. He had no concrete explanation, but offered a few which I mentioned earlier. Obviously the increase in energy prices in the last decade hasn’t helped.

          Having spent a few years working in nuclear before transitioning to oil exploration, I can certainly attest that in the UK it’s a rather bloated industry and that a lot of money does appear to be wasted. The amount of reports which are commissioned and never read is quite staggering. I spent many aimless night shifts doing nothing on Hartlepool pile cap which can attest to that. My opinion is that nuclear is presently far from a mature technology, which partly explains the costs and ongoing development. Gen IV reactors, should they ever make it into reality, might well represent the maturation stage.

          I think the decrease in solar cost is also partly due to a steep decline in quality. I’ve heard tales that cheap Chinese solar panels are about in line quality wise with what you’d expect from other cheap tat from there,

  3. Ian Smith says:

    “These companies want stability and certainty to continue their business in an increasingly uncertain world. ”

    And that is the key item, isn’t it? What independence would bring is massive uncertainty. Not only is the financial stability questionable, the books for the SNP promises don’t add up – and Salmond has been making statements that the oil industry is going to be his golden goose.

    I’d suggest that in the event of a ‘yes’ vote in September, most companies operating in the region would take a long, cold, hard, look at what was in their best interests in a declining region – and I’d expect them to shift most of their assets etc. out of the country, leaving a liquidatable debt laden lump in scotland.

    As you say, it’s not about guesses at reserves, it’s about production rates, costs, and the legal gameplaying that such a split can bring.

    Given that £4.67 billion number was for everything in the UK, and that a lot of the gas is in the southern North Sea, I’d suggest that with a target date of 2017 the SNP shouldn’t be expecting more than £2.5bn in revenue, declining going forward. That’s more than going to be offset by their likely losses in the financial industries as firms move out.

    Oil is a red herring in this.

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  5. Hi Euan,

    I’ve just started following your site. I’m a consultant geologist and have worked in the oil and gas industry, mainly in the UKCS for the last 30 years. Like you I live in Scotland, so I’m often involved in debates on independence. I’ve been arguing almost precisely the line that you have taken in this article, even to the extent of quoting the Scottish Governments own figures. Also like you, I have been surprised at the high estimates of remaining oil production in the Wood report and also by Alex Kemp, the highest values of which are always quoted at me. Today I’ve been challenged by articles on supposed giant fields west of Lewis and the likely productivity of the Firth of Clyde, Solway Firth etc etc, articles generally written by pro-independence authors with little understanding of geology or the oil and gas industry. So really I just want to say thanks very much for this article, which came as a breath of fresh air!

    • Euan Mearns says:

      Andrew, I sent links to my post to Alistair Darling and Better Together and have not had a squeak back – they need to raise their game A LOT. Those who are old enough will recall Clyde Petroleum, some may even have lost money on their shares. The speculation about oil in The Clyde, The Solway etc does enormous disservice to our understanding of how petroleum systems work. Wood and Oil and Gas UK are now hostages to fortune, trying to talk the industry up for one reason but then discovering their optimism may work against their best interests. A lesson to learn there that will not be learned.

      Kemp I feel has been rather measured in what he has said. The 15 billion BOE depends on fiscal and regulatory change recommended by Wood. All this seems to be on ice awaiting the result of the 18th Sep.

  6. Stuart says:

    The independence debate has taken a dramatic twist this week as the polls are undeniably narrowing.
    My own anecdotal experience tells me that this shift in opinion is real.

    The reality is that it is impossible to know exactly how much oil and gas the UKCS will yield in future as there are so many variables and so much uncertainty surrounding so many of the crucial ones.

    Declining production is a huge cause for concern, as is the woeful production efficiency we have seen on the UKCS over recent years.

    Whatever happens on September 18th, we need to examine all the possible options which might stimulate production.

    One fact that is often lost when talking of production declines is the fact that 1 barrel of oil today is 6 or 7 times as valuable as it was a decade ago.

    The debate is obfuscated by a decade of declining production and declining tax revenues whereas on the flip side equally important factors such as gross revenue and the balance of payments has been increasing.

    In 1999 we produced 2.55MM bopd and it was worth $24/bbl, which is $44.2 million per day
    In 2012 we produced 0.84MM bopd and it was worth $101/bbl, which is $85.4 million per day

    Even if we adjust the decline for inflation on a purchasing power parity basis we get figures of $62.2 million per day at the 1999 peak and $87.3 million per day in 2012.

    In purely economic terms the industry is bigger today than it was in 1999. What has happened is that the Return on Investment (ROI) has deteriorated.

    Also if you consider the North Sea in terms of CO2 emissions, in 1999 there was 19kg of CO2 emissions per £1 of GDP contributed, in 2012 that figure was 4kg of CO2 emissions per £1 of GDP contributed.

  7. Regardless of the amount of oil remaining under the North Sea, everything we hear from the IPCC and climate scientists worldwide is that under the North Sea is just where it should stay. So in the long term, the only way that Scotland or the UK can benefit from this natural ‘gift’ is by further trashing the planet and the environment in which the employment and financial benefits gained from oil exist and have any meaning. Future prosperity lies elsewhere.

    As one of my email sigs says “Experience is a hard teacher because she gives the test first, the lesson afterwards.”

    • Euan Mearns says:

      I agree that it is rather hypocritical of The Nationalists to champion renewables in the name of CO2 reduction whilst simultaneously championing the North Sea oil and gas industry. The only way to tackle emissions growth is to ring fence and leave significant inventories of FF in the ground. However, such policy is totally unworkable since 1) you will never persuade Saudi Arabia, Russia, China, Australia, Canada and the USA to leave their oil, gas and coal in the ground and 2) should they do so the world economy would crater resulting in wide spread hardship.

      The prosperity of Mankind is founded upon the energy stored in fossil fuel. I always feel that the costs associated with their exploitation need to be weighed against benefits they have brought us.

      Energy and Mankind part 1
      Energy and Mankind part 2
      Energy and Mankind part 3

    • Stuart says:

      That’s an interest suggestion Steve.

      We should immediately stop using fossil fuels and all starve to death within 12 months (no transport, no fertilizer) rather than starve to death 100 years from now due to climate change?

      It’s like shooting yourself in the face because it looks like you’re going to be mugged.

      In spite of your concerns I expect the planet will still be here, long after the last human being has died. Whether that is a million years from now, a thousand years from now, or next week. Human civilisation is entirely transient, we are just another chapter in the great book of evolution.

      Just 12,000 years ago the sea level was 110 meters lower than where it is today. It was called an ice age. Northern Europe and North America were under 1km of ice. Yet the IPCC would have us believe that if the sea level rises another 1 meter then we would face extinction?

  8. Anaveragejoe says:

    I think this article overlooks an important point. Regardless of whether Scotland becomes independent the UK has a problem. Falling oil supplies and revenue. The UK is already importing oil and will have to continue to do so. I very much doubt an independent Scotland government would wish to scare off the oil industry and is likely to court them. Scotland and England will always be linked by land anyway and trade will flow between the two regardless. The economies are also more closely linked than say Spain/Greece and Germany, and the problems in the Euro area are unlikely to repeat here. The real change will be the devolution of decision making, in a parliament selected by PR rather than first past the post.

  9. Bill says:

    Oil and gas reserves are a red herring in this debate. The movement for independence is about the issues of democracy and social justice, not about gas oil and gas reserves. All of the chatter above is based on the idea the Scottish economy will keep the UK’s inherently unstable and inefficient economic model. All of the above ignores all the discussion about the Nordic models influencing Scottish government policy. As pointed out above the UK’s absurd policy on oil and gas reserves means its tax revenue from these fossil fuels in only £4.67 billion (2013). This is absurd when compared to the sovereign wealth fund of Norway. That is the past. The point is oil and gas tax will only makes up a small share of the Scottish governments revenue for public spending, but even taking that into consideration Scotland still has an economy. There is no agreement on how to calculate the division and thus revenue from the UK continental shelf in respect of oil and gas reserves, the allocation of the UK’s debt and the currency to be used after independence. The “geographical share” the Scottish Government is advocating entitles Scotland to around 85-95% of North Sea revenue. The oil related industries are a major source of employment and income (employs around 100,000 workers or 6% of the working population) for Scotland. Using the above share of the North Sea reserves and Scottish population’s tax receipts for 2010/11 the Scottish Government calculated annual tax revenue to be £53.1 billion. We could ask if Scotland will be able to service its debt with this annual tax revenue. The David Hume Institute argued that here the most important figure for a country is the debt/GDP ratio because it highlights the ability to manage the debt. The UK debt stood at £988.7 billion in January 2012. Through one respected methodology they calculated the UK debt/GDP ratio measured 64.6%, and using the above figures (Scottish population and geographic share of North Sea revenue) it asserted that the Scottish share of debt to be £83.1 billion, which would give Scotland a debt/GDP figure of 64.3%. Whilst the Institute acknowledges other ways of calculating, under the above methodology both countries have very similar debt/GDP ratio (p.10). The point I am trying to make here is that this debt/GDP ratio may also change if an independent Scotland was to change its fiscal policy (tax raising powers) to increase its annual tax revenue. Imagine if changed its income tax bands too. Companies that want to leave can but there is still 5 million people in Scotland as consumers and service users, and with a very skilled workforce. These are the factors that make an economy not oil and gas revenue.

    • Euan Mearns says:

      Bill, you make good points and I agree with much of what you have to say. The purpose of this post was to bring sensibility to the debate about the future of North Sea production. The industry in Aberdeen is heading into deep trouble. Those Scots hoping that North Sea oil will support the economy for decades will be deeply disappointed. We need to make sure that the significant part of the industry here working for foreign clients wants to stay.

      Of course Scotland could be a prosperous and rich independent country. But just because we can do something does not mean we have to do it. We are prosperous and rich now – on average one of the most prosperous and rich countries in the world. Why take risks with that? The question must surely be will we be more prosperous? Or should it be more contented? We have had our own parliament with tax varying powers since 1999, 15 years. And we have had an SNP majority government since 2011, for 3 years. Why has the Scottish parliament and SNP not set about normalising social justice in that ample time and with the ample powers they already have? How do you defend the Council Tax freeze imposed by Hollyrood? I would happily have paid more Council Tax to have supported local schools for example.

      • We are prosperous and rich now – on average one of the most prosperous and rich countries in the world. Why take risks with that?

        We have an expression on this side of the Pond. “If it ain’t broke, don’t fix it.”

  10. Bill says:

    Wow, if strikes me at this late stage in the game you have no idea what the independence movement is all about? That is a wee bit frightening. Interesting to have an American tell a Scot they don’t need independence – I am sure that the Westminster elites probably told the Americans fighting for independence in the 1780s that it ‘aint broke, so don’t try and fix it’?

    Okay, I’m not sure how many people would agree that
    1. the UK westminster system ‘ain’t broke’ (corruption or bad policies on liberalization and privatization) and
    2. whilst Scotland is a prosperious/rich country the key issue for any democracy is how that wealth is shared. The UK is one of the most unequal societies in the OECD.

    For example the UK economy is in crisis again! As you all know the financil sector of the UK economy is the largest in the OECD @ 16 x GDP. It is very unstable (see

    As the NEF blog reminds us,

    “The UK has run a deficit on its trade in goods every single year since 1983. We have imported more goods than we have exported every year for three decades. Including services and overseas earnings (the “current account”), the UK has run a deficit since the mid-1990s. Today, that deficit is close to record levels, at 4.4% of GDP.

    A country running a large current account deficit with a freely-traded currency should see the value of its currency fall. Fewer people abroad will be buying that country’s products, and so demand for that country’s currency will drop, bringing its exchange rate down. That fall in the exchange rate should, in turn, lead to rising exports (since they become cheaper for the rest of the world) and falling imports (since they have become more expensive), so closing the trade gap.

    That’s the theory; it hasn’t happened in the UK because we have an economy that has been extremely effective at covering for its deficit by borrowing from the rest of the world. Today, the UK holds the world’s second-largest external debt, behind only the US. The UK, collectively, owes 406% of its GDP to its overseas creditor”.

    The UK economy with or without Scotland is in a perminant state of crisis, With Osborne signing up to a new round of shadow banking it is argued by many commentators that another financial crisis is on its way. Indeed the shift to financilization in the EU via the Lisbon Strategy and the continuation of these policies via Europe 2020 – the whole of Europe is heading for another financial crisis. The UK cannot not afford to use public money again to buy up the debt of another banking crisis in this casino capitalism where profts are for private individuals and debts are socialized. This is a huge part of the drive to independence.

    It is no secret that contemporary Scottish society encompasses poverty, deprivation and social exclusion, together with an array of inequalities in education, health, housing, income and wealth. A 2014 report stated that 870,000 people in Scotland still live in poverty (17 per cent of the population) and that 200,000 children in Scotland still live in poverty (20 per cent of all children) (Mooney et. al 2014). It further points out that these figures are set to increase in Scotland due to the wave of austerity cuts by the Westminster government (public spending, public services, pensions and welfare benefits), which will impact on those who are already among the most disadvantaged in Scottish society. Whilst Scotland has a devolved parliament, the UK government still determines work and employment policy, welfare benefits and pensions, the minimum wage, most taxation and trade union legislation. It has been argued that once an independent Scotland took back control of these policies it could address the above inequalities with a different economic and social model.

    In contrast to Westminster’s model supporting ‘austerity politics’ (neoliberalization), the Nordic model is seen as an alternative because traditionally it has sought to address inequality and promote social justice through a redistributive tax system; widespread unionization that ensures a strong workers voice when negotiating with employers; a comprehensive social security system with institutionalised social rights; a representative democracy guided by social democratic principles that manages the economy; and promotes social solidarity (see Harvey 2014). In doing so the Nordic model is said to rest on the principle that a representative democracy ought to address poverty and deep-seated inequality so that liberty is not the exclusive property of a wealthy, privileged minority (Brandal, Bratberg and Thorsen 2013: 12).

    The Scottish Gov is pursing many of the policies of the Nordic model, and that is why it needs independence – and they have the support of a huge section of the Scottish population. How oil will be used to support this will develop over time. Finland has shown how to develop wind power for communities not just corporate profit. It is worth remembering the total capital investment in the Scottish renewable energy projects from 2009 to April 2012 was £2.8 billion, with the largest share being in onshore wind at £1.6 billion (Scottish Renewables, 2012). The harnessing of the energy in the Pentland Firth is estimated to bring 40 thousand direct and indirect jobs.

    Another Scotland is possible but it needs to shed the millstone around its neck – Westminster.

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  12. David says:

    An interesting article. It is strong on analysis of reserves and eventual recovery but weak on the financial impacts of what self governance will mean regardless of the estimated reserves.

    a) You stated “The benefits to the economy comes from the economic activity that the oil industry creates.” How true. So, Oil and gas UK states the UK has 450000 jobs directly related to oil and Gas. 90000 of which are in the South East UK — the reserves there are very low indeed. These are high paid jobs. How many offices and supporting services will no longer be needed in London but will have to be located in Scotland? eg All government department / licensing etc related jobs for starters.

    b) The UK has a 20 year master plan for infrastructure investment in the UK. None of which is in Scotland (feel free to look it up). In my opinion The approach of any Scottish government investing in both the oil industry and renewables etc is not a contradiction. Scotland needs the control and the levers to reinvest in many areas. This simply will not happen with Energy policy and finances reserved to London. The only way is to seize control and manage it ourselves.

    The UK is far too metro centric around London. This has to change if Scotland can leverage its resources regardless of how much is actually remaining.

    c) Some tangential questions: Why is Scotland paying for Norwegian gas from Langeled that we don’t need and can’t even use but supplies 20% of total UK supply?(AKA The UK/Norway Framework Agreement) When I say pay, I mean relating to the working agreement that sees the Norwegian companies get a guaranteed ROI funded by all UK taxpayers including those that can’t get the Gas? Why was a massive pipeline to Easington a better business case than St Fergus? <– Maybe it was but, it looks very dubious and was maybe a geo political decision… Perhaps you have some knowledge in this area?

    d) Just for the record Scotlands revenue and expenditure are not audited. All the stats are estimates that are badly flawed at best. However as nationalists point out, it is a fact that the UK government has knowingly and constantly lied and deceived the UK population over Scotlands wealth and resources on one hand and failed to invest here except when there happens to be a clear UK interest. The track record speaks for itself so why anyone would want that status quo to continue, assuming that it is a good thing and less risky, is deceiving themselves.

    The real risk for Scottish residents is remaining under UK governance. Lets not forget that the UK population is exploding with few resources per capita while Scotlands population is more stable with a larger array of resources. So post oil, sharing our resources but not the investment back into Scotland is a much worse proposition than being able to leverage our resources for our own needs primarily and making our own investments.

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