It highlights a key economic issue, namely the way operating costs have risen and look likely to increase. What must be taken into account is how the economic viability of North Sea reserves depends on high prices for a barrel of oil.
There is then a fundamental contradiction between the economics of oil and the need of business for cheap energy to compete in global markets, not forgetting the plight of many households facing ever-increasing costs for domestic energy.
However, this contradiction means there is an acute political problem for government, whether there is a Yes or No vote in the referendum.
At present, expert opinion is for government to “incentivise” North Sea oil production with a favourable and competitive tax regime.
Is it too fanciful to compare this political situation with that facing the deep mine coal industry in the 1980s? Then the prevailing ideology was monetarism, better known as Thatcherism or neo-liberalism, and “incentives” or subsidies were taboo.
The economic and social consequences of the political decision, that deep mine coal wasn’t “economically viable”, are well documented.
What is ironic is that now, after the closure of most of the UK and Scottish coal industry, 45 per cent of coal used to generate electricity is imported from Russia.
Arguably in the context of the ongoing Russia/Ukraine crisis “security of energy supply” must be of fundamental importance in political decisions affecting the future of North Sea oil and gas.
Old Chapel Walk