Sturgeon will find any renewed push is fatally undermined by the economic realityby Nick Butler / June 1, 2020 / Leave a comment
Earlier this year Nicola Sturgeon, First Minister of Scotland, announced that the campaign for independence was being put on hold. At first glance one might have imagined that the prospect of a hard Brexit, and the election of a full-term Tory government in Westminster would have provided fertile ground for a new independence campaign. The stated reason for the delay was the Covid-19 virus but there is surely an economic explanation as well. The collapse in global oil and gas prices has undermined any suggestion that Scotland’s economy can be sustained by the revenues generated from the development of North Sea energy supplies. The reality is that the offshore industry is in deep trouble and as a result Scotland is likely to become more rather than less dependent on support from the rest of the UK.
The crucial number in all this is the oil price. Six years ago the price of a barrel of Brent crude was over $110. That price fell by half, and at the beginning of this year appeared to have stabilised at around $60. Revenue was down, and new developments were few and far between but the North Sea industry managed to keep going by cutting costs, including employment numbers.
The last few months have changed all that. Because of the global recession caused by Covid-19 demand for energy has fallen dramatically. In May oil demand was down by 21.5m barrels a day against the level seen in May 2019, according to the latest analysis from the International Energy Agency. That represents a fall of more than a fifth. Even assuming some upturn as the lockdowns are lifted, year-on-year demand is expected to show a drop of around 8 per cent. Supply has not yet adjusted. Production exceeds consumption, pushing more and more oil (and gas) into storage. Those stocks will overhang the market for months and possibly years to come. There is still a fierce competition for shares of the market between OPEC, Russia and the United States. Although the oil market is always volatile there is little chance of a rapid return to sustained high prices, not least because OPEC and other producers are desperate for revenue and will increase output as soon as prices start to tick upwards.
For Scotland the problem…