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Peaking Of North Sea Oil

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One of the things that's puzzled me about Great Britain is the relative lack of public debate about North Sea oil production having peaked, not only peaked, but sliding over into fairly rapid decline. Why don't people talk about it more? I mean it's not as if this doesn't have enormous implications for the economy. A few years ago one had enough oil to cover dosmestic demand, earn billions exporting oil and now it's over. Britain has to import oil and the natural gas situation is even worse.

The reason I think this is relevant for more than just people living in the U.K. is that there are possible lessons to learn for other countries entering peak oil and maybe patterns will emerge that are interesting to observe with international implications.

For example the U.K.'s political and strategic relations with Russia who are going to be providing lots of gas. Then there's the whole question of nuclear. It appears that Tony Blair, having prayed to his God for inspiration, is going to say yes to a massive increase in nuclear power. Or as they like to call it, the new generation of nuclear power stations.

I remember well over twenty-five years ago whilst at university stating that I thought the oil revenues should be used primarally for three things. Investment in a new transport infrastructure based on a modernised railway system. The modernization of healthcare provision. And finally a radically better education system, so we'd have something to live on when the oil ran out. The development of new industries to replace the old. Instead the money was wasted on tax cuts for the well-off, a massive consumer boom based on cheap energy, and among other things the distruction of the domestic coal industry.

Britain managed it's oil wealth not that differently from some developing nations. That is not really investing in the future, but consuming in the now.

It was strange because the oil was such a gift from posterity, almost a lifeline and the money could have been used so much better. Britain reminded me at the time of an aging courtesan who is suddenly left a small fortune by an admirer. What does she do with the money? Instead of buying a hotel or farm in the country, she opts for a huge party for all her friends and a lot of cosmetic plastic surgury! When the money's gone, she's older and still she end's up on the street corner.

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One of the things that's puzzled me about Great Britain is the relative lack of public debate about North Sea oil production having peaked, not only peaked, but sliding over into fairly rapid decline. Why don't people talk about it more? I mean it's not as if this doesn't have enormous implications for the economy. A few years ago one had enough oil to cover dosmestic demand, earn billions exporting oil and now it's over. Britain has to import oil and the natural gas situation is even worse.

The reason I think this is relevant for more than just people living in the U.K. is that there are possible lessons to learn for other countries entering peak oil and maybe patterns will emerge that are interesting to observe with international implications.

For example the U.K.'s political and strategic relations with Russia who are going to be providing lots of gas. Then there's the whole question of nuclear. It appears that Tony Blair, having prayed to his God for inspiration, is going to say yes to a massive increase in nuclear power. Or as they like to call it, the new generation of nuclear power stations.

I remember well over twenty-five years ago whilst at university stating that I thought the oil revenues should be used primarally for three things. Investment in a new transport infrastructure based on a modernised railway system. The modernization of healthcare provision. And finally a radically better education system, so we'd have something to live on when the oil ran out. The development of new industries to replace the old. Instead the money was wasted on tax cuts for the well-off, a massive consumer boom based on cheap energy, and among other things the distruction of the domestic coal industry.

Britain managed it's oil wealth not that differently from some developing nations. That is not really investing in the future, but consuming in the now.

It was strange because the oil was such a gift from posterity, almost a lifeline and the money could have been used so much better. Britain reminded me at the time of an aging courtesan who is suddenly left a small fortune by an admirer. What does she do with the money? Instead of buying a hotel or farm in the country, she opts for a huge party for all her friends and a lot of cosmetic plastic surgury! When the money's gone, she's older and still she end's up on the street corner.

Britain managed it's oil wealth not that differently from some developing nations. That is not really investing in the future, but consuming in the now
.

How true, how true. Brown's "economic miracle" was no more than a spending orgy fuelled by lax lending standards and short sighted economics. Shame on him.

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Britain managed it's oil wealth not that differently from some developing nations. That is not really investing in the future, but consuming in the now
.

How true, how true. Brown's "economic miracle" was no more than a spending orgy fuelled by lax lending standards and short sighted economics. Shame on him.

In Jan this year the government stated we would continue to be self sufficient in Oil (not gas) until 2010. Maybe this party wil continue for a few more years yet. Long enough for Mr Brown to set up home in No 10 and win re-election. Then the housing / economic crash will come.

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"The UK has [had?] large coal, natural gas, and oil reserves; primary energy production accounts for 10% of GDP, one of the highest shares of any industrial nation"

10% of GDP, a major export, add in up to 66% production levies, exploration licences, corporation taxes, windfall taxes, a 70% tax and VAT on petrol sales... hrm, it's going to blow a huge hole in the finances.

In the future we will import energy and export very little therefore it's a double-whammy for the trade deficit and will undoubtedly hit the pouund, which will then make the deficit even worse. HM Treasury will never see the production levy and taxes, and probably not even the corporation tax.

This is not going to be fun, rationing for environmental reasons is dubious as the UK only contributes 2% of global CO2 emissions, the establishment knows this, the real issue is future supply problems.

Edited by BuyingBear

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In Jan this year the government stated we would continue to be self sufficient in Oil (not gas) until 2010.

They are telling porky pies then, we are currently breaking even with oil extraction and consumption with extraction rates falling from 3.1 million barrels per day in 1999 to 1.8mbpd in 2005. That 1.8mbpd is exactly what we consume. By 2010, we'll be doing well to pull more than 1mbps from the North Sea so unless we are planning some serious fuel conservation there's no way we'll be self sufficient in 2010.

I've written about this here:

UK Energy Gap

Economic Warning from the Archives

Quick calculations show we can't afford to import the oil and gas to replace the North Sea, even if imports were physically available which is unlikely. I sometimes find it funny that HPCers are so worried about whether or not house prices will or will no lose 25% by 2010 - there are far more serious thing afoot in the UK.

Edited by clv101

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In Jan this year the government stated we would continue to be self sufficient in Oil (not gas) until 2010. Maybe this party wil continue for a few more years yet. Long enough for Mr Brown to set up home in No 10 and win re-election. Then the housing / economic crash will come.

Why do people talk about nations being 'self-sufficient' in oil and gas ????

It's a free market. The oil goes to market and gets sold to the highest bidders regardless of nationality. The only benefit a 'nation' has from domestic supply are the tax revenues. I accept of course, that there is a point to made about how those revenues might be invested.

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Arent' there new oil fields in the north sea though, wasn't there a story on the news a few years back of a man camping on a rock in the middle of the north sea for a few weeks to make the UK's claim to them legal.

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Why do people talk about nations being 'self-sufficient' in oil and gas ????

It's a free market. The oil goes to market and gets sold to the highest bidders regardless of nationality. The only benefit a 'nation' has from domestic supply are the tax revenues. I accept of course, that there is a point to made about how those revenues might be invested.

You're missing the point. Having oil and gas reserves is like finding a gold mine in your back garden - it's a gift from nature that you can live off of.... while its lasts. Oil out of the North Sea is oil that we did not have to win export orders to pay for. That is just as well, since due to the contemptuous attitude to industry in this country our manufacturing sector has been in decline for a century.

The point about balance of payments becoming an impossible problem has been made in previous postings. The lack of media debate regarding just what a serious position we are in is typical of the current attitude to whatever threatens the consumer/debt party; ignore it and it will go away eventually.

I believe that the three main parties will suddenly get enthusiastic to join the Euro. That is the only way out. The alternative is the fall of the pound and a major decline in living standards for the British. Escape into the Euro is a nice, shameful evasion of the consequences of political ineptitude by all parties, not just New Labour... so that is what they will do.

If we join the Euro won't that lead to another boom in house prices as the interest rate will be lower... ? This could go on for years. We'll need to consider the scenario that the UK joins the Euro, HPI takes off again but then there is a peak and long decline. Where does that leave us? Many of the consequences of HP decline will be dispersed by the sheer size of the Euro zone.

Any thoughts?

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You're missing the point. Having oil and gas reserves is like finding a gold mine in your back garden - it's a gift from nature that you can live off of.... while its lasts. Oil out of the North Sea is oil that we did not have to win export orders to pay for. That is just as well, since due to the contemptuous attitude to industry in this country our manufacturing sector has been in decline for a century.

The point about balance of payments becoming an impossible problem has been made in previous postings. The lack of media debate regarding just what a serious position we are in is typical of the current attitude to whatever threatens the consumer/debt party; ignore it and it will go away eventually.

I believe that the three main parties will suddenly get enthusiastic to join the Euro. That is the only way out. The alternative is the fall of the pound and a major decline in living standards for the British. Escape into the Euro is a nice, shameful evasion of the consequences of political ineptitude by all parties, not just New Labour... so that is what they will do.

If we join the Euro won't that lead to another boom in house prices as the interest rate will be lower... ? This could go on for years. We'll need to consider the scenario that the UK joins the Euro, HPI takes off again but then there is a peak and long decline. Where does that leave us? Many of the consequences of HP decline will be dispersed by the sheer size of the Euro zone.

Any thoughts?

If I find a gold mine in my back garden, how does this help you ?(assuming you are also a UK national) This is the point I was making.

I appreciate your comment about overall balance of payments (trade ?) but I think this is a confounding issue these days.

Edited by Columbo

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If I find a gold mine in my back garden, how does this help you (assuming you are also a UK national) This is the point I was making.

Assuming you were my gardner (ie, you were a UK citizen) it would help you because you use the UK currency, which is sustained higher due to exports of oil. You pay less tax and get more public services. You also are to some extent shielded from foreign competition at work since there is less imperative to win export business to import oil from the neighbour's garden. You can do less gardening and more goofing off and so can I. Or at least, unless oil prices collapse. The Soviet Union faced a forex crisis in the 1980s when their oil production fell and the oil price dropped due to Saudi opening the taps. It is said that this starvation of forgeign earnings into the Soviet Union was the main reason it collapsed. I don't know if this is true or not, but it can't have helped.

Admittedly the oil companies could have sucked the North Sea dry and never sent a drop of it to Britain. But this woud have been politically impossible due to their dependence on the mainland for bringing the oil ashore, having supply depots and refineries here and so forth. But they had to be nailed down to do that, it did not happen just by accident.

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Why do people talk about nations being 'self-sufficient' in oil and gas ????

It's a free market. The oil goes to market and gets sold to the highest bidders regardless of nationality. The only benefit a 'nation' has from domestic supply are the tax revenues. I accept of course, that there is a point to made about how those revenues might be invested.

It matters a great deal, the North Sea makes our trade deficit appear less worse than it should be, it keeps the pound strong which makes imports cheaper and inflation low, this will be reversed as exports will become imports, a double impact. It provides the Treasury with revenue from no where, it means we have security and certainty of supply as we can't hold ourselves to ransom, and it's piped directly into our refineries.

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Guest tenant super

Arent' there new oil fields in the north sea though, wasn't there a story on the news a few years back of a man camping on a rock in the middle of the north sea for a few weeks to make the UK's claim to them legal.

I think that was Tom McLean who stayed on Rockall which is out on the edge of the continental shelf west of the hebrides and beyond even St Kilda. I am not sure what reserves there are out but I don't believe any oilfields have bee developed. Perhaps this is the UKs pension plan, wait till oils a billion dollars a barrel then get pumping.

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It matters a great deal, the North Sea makes our trade deficit appear less worse than it should be, it keeps the pound strong which makes imports cheaper and inflation low, this will be reversed as exports will become imports, a double impact. It provides the Treasury with revenue from no where, it means we have security and certainty of supply as we can't hold ourselves to ransom, and it's piped directly into our refineries.

I think I get where you guys are coming from but I don't see it's as straightforward as this. Why has USA become increasingly more wealthy even though it has been a net oil importer for over thirty years?

The people selling oil from the north sea don't necessarily have to take payment in pounds do they ?

Edited by Columbo

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I think that was Tom McLean who stayed on Rockall which is out on the edge of the continental shelf west of the hebrides and beyond even St Kilda. I am not sure what reserves there are out but I don't believe any oilfields have bee developed. Perhaps this is the UKs pension plan, wait till oils a billion dollars a barrel then get pumping.

first though they will need to beat a very strong claim to that rock by ireland, as this song says

Oh the empire is finished no foreign lands to seize

So the greedy eyes of England are looking towards the seas

Two hundred miles from Donegal, there's a place that's called Rockall

And the groping hands of Whitehall are grabbing at its walls

Oh rock on Rockall, you'll never fall to Britain's greedy hands

Or you'll meet the same resistance that you did in many lands

May the seagulls rise and pluck your eyes and the water crush your shell,

And the natural gas will burn your ass and blow you all to hell.

For this rock is part of Ireland, 'cos it' s written in folklore

That Fionn MacCumhaill took a sod of grass and he threw it to the fore,

Then he tossed a pebble across the sea, where ever it did fall,

For the sod became the Isle of Man and the pebble's called Rockall.

Now the seas will not be silent, while Britannia grabs the waves

And remember that the Irish will no longer be your slaves,

And remember that Britannia, well, - she rules the waves no more

So keep your hands off Rockall - it's Irish to the core.

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I think I get where you guys are coming from but I don't see it's as straightforward as this. Why has USA become increasingly more wealthy even though it has been a net oil importer for over thirty years?

Because they can print bits of green paper and exchange them oil, it's like writing cheques that you know will never be presented. The UK isn't in this position and the US is already pushing its luck despite its reserve status, they live beyond their means thanks to foreign loans that are provided by Asian central banks in order to prop up manufacturing and employment in their own countries.

Also, I would contest that Americas dependence on imported oil is far from healthy let alone sustainable.

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Guest tenant super

Homeless cheers for that. As I understand it each of the UK, Ireland and Iceland have a genuine claim for this.

You will note your schoolboy error in associating the UK as England. Personally I am hoping the lifting of the World Cup. The fallout from the injustice of the imposition by Scotland of Gordon Brown on the English and reflections on 300 years of the Act Of Union next year that England will not be part of the UK for much longer!

There'll be no oil money but we can make our living in part by writing better songs than our neighbours and keep ourselves amused for 300 years by blaming the Celts for our impoverishment.

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its worth it just to see more boomer ramblers complaining about nimby wind farms popping up on empty fields or even out to sea. david bellamy being a prime example. do you reckon hes a btlr too ?

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Homeless cheers for that. As I understand it each of the UK, Ireland and Iceland have a genuine claim for this.

You will note your schoolboy error in associating the UK as England. Personally I am hoping the lifting of the World Cup. The fallout from the injustice of the imposition by Scotland of Gordon Brown on the English and reflections on 300 years of the Act Of Union next year that England will not be part of the UK for much longer!

There'll be no oil money but we can make our living in part by writing better songs than our neighbours and keep ourselves amused for 300 years by blaming the Celts for our impoverishment.

Not an error, just pasted a song about rockall by the wolftones.just to show its more than the uk that have a say about it.Im scottish by the way living in england last couple years, from republic ireland father and london mother, so ive no real bias either way, i do however believe in a british isles economic union but of independent nations within it.

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Not an error, just pasted a song about rockall by the wolftones.just to show its more than the uk that have a say about it.Im scottish by the way living in england last couple years

Gordy... is that you?

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there are far more serious thing afoot in the UK.

What are the more serious things ???

Energy! What use is a 25% reduction in the price of a 3 bed semi if there are rolling blackouts and 30% unemployment? Even within the HPC community (which has its eyes wider open than most) there is still a lack of appreciation of the severity of our energy gap.

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Why do people talk about nations being 'self-sufficient' in oil and gas ????

It's a free market. The oil goes to market and gets sold to the highest bidders regardless of nationality. The only benefit a 'nation' has from domestic supply are the tax revenues. I accept of course, that there is a point to made about how those revenues might be invested.

The primary benefit from any productive industry is the economic wealth it creates. Tax is possible only because of this. The UK will be losing an awful lot of wealth generation as the North Sea output continues to slide whilst sending ever increasing amounts of that wealth offshore to pay for imported oil and gas.

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I think I get where you guys are coming from but I don't see it's as straightforward as this. Why has USA become increasingly more wealthy even though it has been a net oil importer for over thirty years?

The people selling oil from the north sea don't necessarily have to take payment in pounds do they ?

Oil is ONE source of economic wealth, there are others. For example Japan has made itself wealthy largely through manufacturing despite having virtually no oil or gas of its own. The problem for the UK is that the country not creating sufficient wealth from other sources, being heavily dependent on oil both via actual exports (historically) and avoidance of imports. That source of wealth is diminishing and in the absence of a mass resurgence in manufacturing there is nothing with which to replace it. End result - the country is poorer.

On a global scale diminishing oil supplies hinder virtually all economic activity and thus make the creation of wealth harder for practically every country except those still having large oil reserves and able to export oil. But they too face trouble in the long term.

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When Piper Alpha blew up all those years ago, a major network of oil exporting pipelines were affected and shut down for months. This was a major dent into the treasurey coffers and almost certainly a large factor in throwing us into the last recession.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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