Strahan: Gordon Brown doesn’t get the oil crisis

Even by the low standards of his Government, Gordon Brown’s recent pronouncements on oil have been surprising. Writing in a national newspaper on Wednesday, he argued that the price of a barrel had soared to $135 because of barriers to production that are “technical, financial and political”.

Many experts expect non-Opec production to peak by around 2010, due to geological reasons

There are problems here, sure enough, but the word he left out was “geological”, and the omission is crucial. It means he really doesn’t understand the profundity of the current crisis, and explains why panicky initiatives are bound to fail.
Brown and Darling can implore North Sea oil producers to pump harder, they can even finagle the tax regime to raise the incentives, but it will make very little difference. North Sea oil production peaked in 1999 at 2.9 million barrels per day and has now fallen by almost 60 per cent to around 1.2 million. This happened, as in all mature oil producing regions, because of two simple facts of life.

First, oil is produced from deeply buried, highly pressurised reservoirs. This is great news to start with; the pressure forces the oil up the pipe of its own accord. But as the oil is produced the pressure is relieved, so the oil inevitably comes out more and more slowly as time goes on.

Second, in any given region, oil companies usually find and exploit the biggest oil fields first. So, as time goes on they are forced to scrabble around for ever smaller deposits. It is principally this combination of geological factors, rather than economics, which caused North Sea production to peak and decline.

Changing the tax regime will make very little difference to UK output, let alone the global oil balance that determines the price.

As for the rest of the world, Mr Brown is even further astray. Last week, he ranted at the “scandal” that Opec controls 40 per cent of the world’s oil, as if it were somehow outrageous that our oil should have found its way under their sand. Here again the geology is in control.

Telegraph