Scotland’s oil wealth – bluster, lies and a few facts

I have to confess I really enjoyed the sight of podgy, Toad look-alike Alex Salmond mauling the hapless Alistair Darling in the second Scottish independence debate last week. Particularly impressive was the way Salmond asked Darling questions and then answered them himself not even giving the bumbling Darling the chance to respond.

One of the big issues about which the two combatants shouted at each other was how much oil there was left in the North Sea and whether the tax revenues from Scotland’s part of this oil would be sufficient to pay for Salmond’s socialist paradise where everyone would get everything for free.

Salmond predictably blustered that there was more than enough oil and quite rightly said that Westminster had underestimated Scotland’s oil reserves for years as the Government’s forecasts did not take account of new extraction technologies.

Darling quite rightly whimpered that oil revenues were falling and were predicted to fall further.

While nobody can accurately predict the future, we can look at what has happened in the past. Here are the figures (click to see more clearly)

Scotland’s oil revenues jumped about a bit between 2008-09 and 2010-11. They then shot up in 2011-12. But this was because Osborne imposed a windfall tax on oil revenues as he claimed high oil prices meant the oil companies were making excess profits. But since then Scotland’s oil revenues have been plummeting.

Salmond has predicted that Scotland’s oil reserves will yield around 24 billion barrels of oil over the next 36 years. Assuming he is right, this would produce (24 billion/36 years/365 days) 1.82 million barrels per day.

The average for the last 40 years has been (40 billion/40 years/365 days) 2.74 million barrels per day

So Salmond’s prediction would only require production to equal 66% of what has been extracted daily over the previous 40 years. That seems almost feasible, though North Sea oil’s best decades are long since gone.

Average oil tax earnings for Scotland for the last 40 years (at today’s prices) are £6.5bn per annum. If costs remained the same, average oil tax earnings for Scotland for the next 36 years would be around £4.3bn per annum. However, the cost of extracting oil has increased and will increase further since the oil fields are in deeper waters. So Scotland will struggle to earn £3.5bn per annum from oil tax revenues since oil tax is charged on profits i.e. revenue less costs. So, even if North Sea oil does give the quantities Salmond predicts (which is unlikely), it’s more than improbable that it will give the tax revenues Salmond needs.

Unless, of course we include all the oil in Scotland’s deep fat fryers – then Salmond might hit his oil targets.

Personally, I hope Scotland votes for independence. It will give Scotland a new sense of purpose and energy which, under proper leadership (not that of Fatboy Salmond), could make the country successful.

As for the rest of the UK, it would mean that Maggot Miliband’s useless Labour would be unelectable following the loss of their 41 Scottish MPs. One Labour MP recently admitted “If we lose Scotland, we could be completely buggered”

So, if Scotland goes, we’d all benefit. Go on, Scotland, go!

And if Scotland goes, we could call the remaining bits of the UK the “Former UK” and abbreviate that to…..