What Osborne\’s really done wrong

Well, what he\’s done wrong if this report is true:

The company said a month ago that it would probably not reopen its South Morecambe field, after four weeks of planned maintenance. It says the higher tax rate has rendered it uncommercial.

In a surprise move, Mr Osborne raised the effective tax rate on production profits to at least 62pc and up to 81pc for older fields in his March budget when oil prices are more than $75 per barrel.

However, companies have complained that this unfairly penalises gas fields, because the gas prices is comparatively much lower than the oil price.

He\’s linked both the gas tax and the oil tax to the oil price.

Which, historically, would have been fair enough, given that the two moved pretty much in lockstep.

However, this shale gas thing is in the process of delinking the two prices. Over  in the US the gas price is hugely lower than the oil (for equivalent energy content etc) in a manner not seen before.

So Osborne really shouldn\’t have linked the gas tax to the oil price, very silly.

One comment on “What Osborne\’s really done wrong

  1. The connection between British and US gas prices is presumably through intercontinentally tradeable LNG? Anyway, the prices are what they are – he has time to change his mind.

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