Silly question

We\’re seeing a lot about how Maggie \”wasted\” North Sea oil.

Anyone got any numbers on how much it actually was? I\’ve not even got a feel for what portion of the economy the government managed to snaggle of it. I really don\’t know whether it was 0.1% of GDP, or 100% of GDP (err, that\’s not really possible but…..).

I know it was a very much smaller precentage of GDP than Norway got, they having more oil and gas and a much smaller GDP.

But what actually was it that was \”wasted\”? How much of GDP?

My very vague feeling is that it really wasn\’t all that much. But it would be nice to know.

36 thoughts on “Silly question”

  1. If she’d stowed it all in a sovereign wealth fund they’d be crowing about how she should have spent it on school milk.

  2. One of the most common, and most stupid, criticisms is that she should have created a government-owned, national oil company (perhaps forgetting that we already had one) in order to develop the UK fields on an exclusive basis, thus ensuring the “profits” went to the people instead of private oil companies.

    They claim that the money could have been “invested” in the country (read: pissed away on inflated public sector wages and vanity projects) or invested in a sovereign wealth fund which would never be raided by desperate Chancellors, oh no. They cite Norway as the model, assuming that UK politicians would have had the sense and self-restraint to avoid the Dutch disease and not treat the company like a cash cow, unlike almost every other national oil company in the world. Which is a rather big assumption. And they completely ignore the fact that the competing privately owned oil companies has turned Aberdeen into *the* global centre of excellence for oil and gas services bringing in billions in a revenue stream which will outlive the fields themselves – something which has never developed around a national oil company.

    In short, the most sensible thing she ever did – and I am benefiting from this right now – is resist any pressure to nationalise the UK’s oil industry.

  3. Tim, she should have taken the sustainable approach. Oil extraction from the North Sea should have been limited to ensure there is enough oil in the ground until the next William comes and speed up the extraction.

    The Oil from the North Sea should have been rationed and only the government cars, defence force, and trade union officials allowed to top up from that National Resource!

  4. Tim Newman

    What do you mean, if we had a national oil company they could have sacked those who didnt vote for socialism like they did at PDVSA

  5. Looking at the growth of State spending over the past thirty years, the idea that the UK government would have set up some sort of sovereign wealth fund and left it alone is just fucking laughable.

  6. I think probably this is another manifestation of the usual leftist belief that the profit share of production is much larger than it really is.

  7. What do you mean, if we had a national oil company they could have sacked those who didnt vote for socialism like they did at PDVSA

    Yup, and looted the company’s maintenance budget to spend on buying votes.

  8. Oil extraction from the North Sea should have been limited to ensure there is enough oil in the ground until the next William comes and speed up the extraction.

    A lot of people actually suggest this! You can take my word for it that, whether a good idea or not, every country in the world – with the sole exception of Saudi Arabia – attempts to maximise production. Of course, most of them don’t manage it due to dumbfuck policies, but they are all trying.

    One of the more amusing opinions amongst Russian nationalists is that the failure of the Russian state to develop its oilfields and arrest declining production is not a sign of incompetence on the part of its national oil and gas companies: it is a carefully managed strategy of Putin to ensure Russia’s resources are not squandered now, but are left for future generations!

  9. OK
    So how else were tax cuts, hundreds of thousands of new benefit seekers and the near collapse of rental income from social housing paid for?

    You really are mad. All of you over these last pages.

  10. UK nominal GDP in 1985 was GBP350bn. So oil tax (which is what Shinsei’s data measures) was 3% of GDP, or about 8% of total tax revenue.

  11. What’s different about Saudi Arabia?

    They are the only ones with a production capacity large enough to create a global price drop if they maximise production, so they withhold production to ensure the price stays higher. In theory, all OPEC countries are supposed to stick to their quotas but in practice they all overproduce and bullshit each other about it. For example, the field I am working on in Nigeria is a condensate field and what we send to the tankers is condensate but almost crude. It’s effectively off-spec crude. But this means it does not fall within the OPEC quota. Every country wants the revenue, so they all maximise production. Saudi production is so huge that they maximise revenue by limiting production.

  12. Matching it to nominal GNI – between 1980 and 1990, it comes to just under 20% of GDP, peaking at 3.4% in 1984/1985

    It should be noted that the displacement effect of having a higher exchange rate than would otherwise have been the case means that the net increase in revenue is less than this (because of the other firms that would have been driven out of business by the higher exchange rate). How much less is a matter for debate.

  13. Tim
    “One of the most common, and most stupid, criticisms is that she should have created a government-owned, national oil company ”

    Yes, I’d say the UK version would have looked a lot more like Pemex than Statoil.

    Can you also imagine just how long it would have been before the likes of Willy Hutton started the drum beat to get their hands on the cash.

  14. Oil and gas exploration was under way in the seventies. Most nationalisations involved failing industries. Unconvinced of the merits in any case, but politics is the art of the possible.

  15. @ Charlie Suet
    Also in the sixties.
    Aramco was not a failing industry when it was nationalised.
    Steel was not failing when it was re-nationalised but British Steel failed thereafter. I was born in a steel and shipbuilding town and could write reams about how and why the Labour government ruined both industries. I cannot remember the Attlee government’s nationalisation programme but their declared policy was to capture the crowning heights of the economy not to rescue failing companies which they would have been quite happy to watch die.

  16. Yes, I’d say the UK version would have looked a lot more like Pemex than Statoil.

    Exactly.

    Can you also imagine just how long it would have been before the likes of Willy Hutton started the drum beat to get their hands on the cash.

    Less time than it takes tea to brew. In fact, they’d have earmarked the money and spent it twice over before a field even came onstream.

    I am eternally grateful that the North Sea oil business is considered the best in the world in terms of safe practices, standards, and quality (although don’t expect a Yank fresh out the GoM to admit this, nor a Frenchman for that matter). If we’d gone down the nationalisation route, we’d now (actually, probably 10 years ago) be looking at what to do with tens of thousands of utterly useless, unemployable individuals who lazed their careers away doing sweet FA in a national oil company.

  17. Tin N #3

    Yes. Those very same people who reckon that we should have had a SWF are from the same background as those who cheered on Gordon’s spending madness are now now keen advocates of Keynes.

    They just wouldn’t have been able to keep their fingers out of the till.

  18. there are still (just) senior managers who joined BP/BNOC when they were nationalised industries and they are unbelievably awful to deal with as they have the Civil Service attitude that “doing nothing is better than making a mistake, so let’s have another meeting…”

    There are several key differences between the UK and Norway – the UK had a large population and an extensive base of high-employment manufacturing industries that were dying and being propped up with state subsidy. Norway’s population was relatively tiny and mainly agricultural (including forestry) and fishing, and the Norwegian sector fields tend to be larger and more biased towards oil, which makes for higher profit levels. The government over there has also shown much less tendency to muck about with tax rates, whereas UK oil and gas taxation has been fiddled with in pretty much every budget since the mid 70s, including one famous cock-up by Tony Benn who imposed a marginal tax rate of 100.6%

  19. I’m so old that I can remember Harold Wilson warning the public that claims that there were oil and gas under the North Sea were just Tory propaganda. Dreary little bugger, wunhe?

  20. there are still (just) senior managers who joined BP/BNOC when they were nationalised industries and they are unbelievably awful to deal with as they have the Civil Service attitude that

  21. there are still (just) senior managers who joined BP/BNOC when they were nationalised industries and they are unbelievably awful to deal with as they have the Civil Service attitude that “doing nothing is better than making a mistake, so let’s have another meeting…”

    So you can imagine what it is like to be working in the major French oil company, then? 🙂

    To be fair, this is common to all the major oil companies (well, at least 3 of them). Shell was really bad for this, which is odd because it was never a national oil company like Elf or BP. But then it’s not so odd: you have an organisation which does not need to worry about how money is spent, and in which career progression is paramount above anything else. Result: everyone scared to make a decision, so endless meetings and deferrals. Even in Exxon, who by and large were pretty impressive, I came across individuals at the sharp end who had no interest in progressing a job through fear something might go wrong. Better to invent some excuse and blame the contractor.

    The smartest people in the oil and gas world do not sit in the supermajors, they are to be found in the contracting companies or the independents. The majors simply have too much money to worry about it being wasted (whereas governments don’t care because it isn’t their money, hence the similarities). I wrote about this here.

  22. Tim, Chevron has been very good to deal with IME, once you got to their main guys, it was straightforward and pragmatic outcomes usually.

    Of course, it was always a battle to get to them through various EPCM no-hopers, but at least it was worthwhile!

  23. tory boys never grow up

    Perhaps a more fruitful examination would be what happened to the investment as a % of GDP inder Thatcher. There really is no argument that the declining traditional industries had to be replaced with something else – but was letting the financial sector do pretty much what it wanted, while at the same time channeling much finance into the residential property sector really good for the long term wealth of the country. Perhaps the contrast with what happened in Germany over the same period might bear a little examination.

  24. @ #35 tory boys never grow up
    “was letting the financial sector do pretty much what it wanted, while at the same time channeling much finance into the residential property sector really good for the long term wealth of the country.” is a question that you should ask Blair and Brown. House prices rose more under New Labour than from the dawn of time to June 1997 and the financial sector was *not* allowed to do pretty much what it wanted. The abolition of single capacity in the Stock Exchange (called “Big Bang”) was wanted by neither stockbrokers nor institutional investors.

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