The cost of keeping the economy afloat on oil

A two-day stoppage gave Scotland a flavour of what might happen when North Sea supplies run out, and the effects are grave

Iain Armstrong oil and gas analyst with Brewin Dolphin:

Oil firms are having to go further, dig deeper and spend more to get less out of the ground. We have constantly got this catch-up. The costs are getting higher and higher.
Before 9/11 we would say that the political dimension of the oil price was maybe $3-$5 a barrel. Now it’s more like $20-$25 a barrel. The difference between demand and supply equilibrium is 1-1.5 million barrels a day so we are 1-1.5 million barrels short. Something simple like the Forties Pipeline being shut – that’s 750,000 barrels a day to the market. It doesn’t take a lot to get people scared. The short-term price is bulked up, which makes speculators think the long-term price is going up. The futures price is well over $100 a barrel.

We criticise oil firms for their big profits but they made nothing at the UK forecourts.

Two of the world’s largest oil-producing areas – Mexico and the North Sea – are in permanent decline. I estimate the UK has ten-15 years left. I would have given the same five years ago, but as the oil price is five times higher, resources not normally in play suddenly are.

Scotsman