Oil and war are words that often share the same sentence. As the price of Brent crude oil scaled to the record breaking heights of $135.14 per barrel last month, this commonality was only further exemplified, and arguably nowhere more so than in Scotland. The war in question in this instance may simply be one of words, but it is perhaps no less potent.

 

The hike in price is obviously much to the disappointment of the car owner, the long haulage industry, and the general consumer with average energy bills also being affected. But the oil industry itself is benefiting from the price rise and is capitalising with greater development and technological innovation. And with Scotland currently sitting as the seventh largest oil producing county per capita in the world, the tension between these two warring schools is a particularly fraught one.

 

Primary cause for the rise in oil prices in the last year has been given to the spurt in demand from the developing industrial economies of China and India upsetting a finely balanced supply and demand equilibrium. Increased speculation by financial institutions has also been argued to have caused the market to become more volatile.

 

Storms in the Gulf of Mexico, unrest in the Middle East, and rocket testing in North Korea have all been said to have been given undue prominence in affecting oil prices purely because of irrational speculative fear that it might affect the supply of oil. Of more particular relevance though is the role of the producers. It is argued that producers such as OPEC are manipulating the market to their advantage by curtailing oil production and stifl ing levels of supply to increase profits.

 

Despite attempts by the UK Prime Minister, Gordon Brown, to stimulate increased supply by way of personal pleas to OPEC and the North Sea Oil platforms, there is a friction over what constitutes actual best practice policy, with particular reference to Scotland. The spike in oil prices has had obvious ramifications at the petrol pumps with the average price of a litre of unleaded petrol now sitting around 114 pence, and diesel at around 126.4 pence. And according to the motoring organisation, the AA, another $5 leap in the oil price could add a further 2.5 pence to the price at the pump.

 

“The threat of even higher prices in the pipeline will perch like a vulture above UK forecourts waiting to pick an even bigger hole in the pocket of drivers and consumers,” AA president Edmund King claimed recently. The British Chamber of Commerce has also warned that companies are being pushed to the absolute edge and have called on the chancellor, Alistair Darling, to abandon plans to increase petrol duty by 2 pence in October.

 

British Gas owner, Centrica, has also signalled that average energy bills could rise to meet growing costs with several major suppliers already increasing prices by as much as 17 per cent. Despite this backdrop, however, the oil industry itself is in a state of boom because of the high price of oil, and with the North East coast of Scotland providing centre stage for oil production in Western and Central Europe, the high price is key to both the industry’s continued success and the local and national economies of Scotland and the UK as a whole.

 

Estimates by Scottish fi - nance secretary, John Swinney, suggest that if the price remains around an average of $114, the result will be a £4 billion windfall to the UK Treasury in the current fi nancial year alone. And in the immediate locum of the UK’s busiest harbour in Aberdeen, the oil boom is estimated to provide a further £400 million to the region’s economy.

 

The recent price rise is also helping to fuel rapid advances in oil related technologies in the quest to further explore the oil rich beds of the North Sea. As Rob Fisher, the engineering manager of Technip, one of the largest sub sea engineering fi rms based in Aberdeen, said: “The high oil price is an incentive to continue to develop new technologies and keep production going”.

 

According to oil industry experts, the high price will probably stay, with some even recently claiming that the price could top $200 per barrel by this time next year. The peculiar dichotomy thrown up by the contrasting fates of the oil industry itself and most other sectors of the economy is likely only to continue. War and oil are words that share a lot of sentence for a reason after all.

 

Christopher Jenkins