Can an oil boom really cause economic doom?
Figures last week showed Scotland’s deficit is now higher than the UK’s due to falling oil revenues. Critics say that makes Alex Salmond’s case for independence look wobbly.
But hang on a minute. Scotland’s actually got oil. Can that really be such a bad thing? No, it can’t.
Certainly it’s tricky when a nation relies too heavily on one commodity like the black gold whose price fluctuates dramatically on world markets.
The latest balance sheet for Scotland the Government Expenditure and Revenue Scotland shows oil profits took an unexpected nose dive last year.
With the referendum just six months away, Better Together say this proves what a perilous place an oil-dominated, independent Scotland would be without the ‘stabilising’ influence of the UK.
But that’s not what the smart money is saying.
The international credit rating agency Standard and Poors says an independent Scotland would “qualify for our highest economic assessment” which means Triple A rating.
S&P conducted a thorough survey of the Scottish economy, including those dangerously volatile oil revenues and the threat some banks might leave. It concluded neither risk was serious.
So that puts an independent Scotland in a pretty elite club of small, sensible Triple A rated nations like Denmark, Finland, Sweden and Norway and well-managed large nations like Germany, Canada and Australia.
An independent Scotland wouldn’t be a slam-dunk for ‘most reliable’ status but it would need mismanagement of RBS proportions to miss that open goal. Who says?
Well, the Financial Times reported: “An independent Scotland could expect to start with healthier state of finances than the rest of the UK.”
And retired oil tycoon Sir Ian Wood produced a report commissioned by the UK Government which estimates there’s as much oil left in the North Sea as already extracted and an independent Scotland could start life with another mini oil boom.
Sure it will be harder and more expensive to extract. But President Putin’s invasion of Ukraine served as a timely reminder that home grown energy reserves are useful things economically and politically.
And anyway other countries have ‘coped’ well with loadsa oil.
Norway is the world’s seventh-largest oil exporter and the third-largest for gas.
But our smart Nordic neighbours save the cash in a wealth fund for future generations and use only 4% in each annual budget.
That’s not rocket science. It’s just unfamiliar to most ‘grab it and spend’ politicians and commentators in the UK.
There’s another point. The Oil Age, like the Iron Age, will pass a temporary blip used wisely by some nations to prepare for life after fossil fuels and greedily by others to increase inequality.
I’m afraid history will judge the UK very harshly oil wealth just helped Mrs T create billionaires and privatise utilities like rail, electricity, phones and energy. But now Scotland has a choice.
The remaining oil reserves give us breathing space to shift from oil and gas to a sustainable future based on renewable energy. But only if we are as single-minded and disciplined as the Norwegians.
Is that best achieved within the UK raiding oil coffers to finance pet political projects or within an independent Scotland which can shift to hydro, tidal, wave, wind, biomass and solar in the lifetimes of our children?
We can’t choose the price of oil. But we can choose the government to ‘cope’ with the incredible wealth it brings.
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