In an astonishing feat of fiscal incompetence the UK government has, for the first time ever, managed to make a loss from North Sea oil.
Averaging between 800,000 to 1 million barrels of oil per day through 2015, fiscal policy and generous tax breaks to oil companies seems to have left the UK taxpayer in the incredible position of actually owing money to oil companies, which is quite an accomplishment. The figure is mooted at £24 million.
It is wholly understandable in the current oil market to expect a weak price of oil to considerably impact upon tax revenues, but the fact of the matter is that the UK government has in effect allowed private companies to extract over 300 million barrels over the course of a year from our economic areas of interest, and has somehow managed to get less than nothing in return. How is such mishandling of resources even possible, given the ‘broad shoulders’ mantra during the Scottish Independence referendum?
Total fiscal incompetence is a speciality of the UK government in the matters of oil though. While most countries have set up an oil fund to finance major infrastructure projects and to act as a buffer during troughs in the oil cycle, the UK squandered the revenues on the here and now, possibly through actually believing their own insistence that the oil will perpetually be running out in 10 years.
It’s never too late, you know. It’s never too late to admit that the whole UK oil episode has been an embarrassing shambles, and to go ahead and start that fund.