Without North Sea oil and gas it is unlikely that there would even be a referendum on Scottish independence. Its discovery is the first chapter in the foundation story for nationalists who believe that Margaret Thatcher was in effect Daniel Day Lewis in There Will Be Blood. But oil is about more than the past; it is critical to the Yes campaign’s arguments about the present and the future, too. It anchors the (somewhat spurious) argument that Scotland would be richer than the rest of the UK, and allows Alex Salmond to promise the creation of a sovereign wealth fund.
Scots’ perceptions of the economic consequences of independence will be vital to the outcome of the vote on September 18. But unfortunately for Scots there is a big discrepancy between the forecasts of direct tax revenues from the North Sea made by the Scottish government and those made by the Office for Budget Responsibility, the UK’s fiscal watchdog. In this post I want to try to explain why these forecasts differ and why I believe the Scottish government’s optimism is misleading.
In the film There Will Be Blood, Daniel Plainview, a monomaniacal oilman played by Daniel Day-Lewis, tries to lowball the Sunday family, whose hydrocarbon-rich land he covets, by claiming that he wants their acreage for quail-hunting. But Eli Sunday knows Plainview’s real intentions. He asks for $5,000, ostensibly to invest in his evangelical church. Many years later, Eli, who never received the money from Plainview, tracks the multi-millionaire oilman down in his Xanadu. Eli complains of past grievances and brings a quixotic plan for future exploration of the Sunday land.
I won’t spoil the ending but there is something – an admittedly tenuous something – of the Eli Sunday in the Scottish National party’s arguments about North Sea oil and gas. Alex Salmond’s party is right to be critical of how opportunities were wasted but it is too sanguine about what oil and gas would offer an independent Scotland.
In 1972, the Scottish National party launched a campaign poster featuring a photograph of a forlorn old lady beneath the slogan: “It’s her oil”. Four decades and 3.5bn tonnes of North Sea crude oil production later, Scotland is preparing for a vote next year on whether it should become independent for the first time since 1707. The SNP’s case is about more than oil – but it is central. Those after analysis that goes beyond tendentious snaps of women in their dotage should read Gavin McCrone’s guide to the economics of the referendum.