One of Scotland’s most respected oil economists has today taken the UK Treasury to task over its oil & gas forecasts which he described as ill-informed and “well wide of the mark”.
Writing for the Sunday Times online, Professor Sir Donald MacKay has pointed out that using oil price predictions from the Department of Energy and Climate Change (DECC) and official production forecasts from Oil & Gas UK, would generate revenue of £31.8 billion between 2017-19, almost double the £15.8 billion claimed in Treasury figures.
Sir Donald is a former chairman of Scottish Enterprise, former Economic Adviser to the Secretary of State for Scotland for more than 25 years and chairman of the Scottish Mortgage Trust.
Professor MacKay who authored key works on the Economy of the North Sea and the Political Economy of North Sea Oil in the 1970’s, dismissed claims from UK Treasury Minister Danny Alexander, stating: “if Danny looks at this he might conclude there is no hole in the Scottish Government’s oil predictions but there is a mountain of black gold missing from his.”
There was criticism of the Office of Budgetary Responsibility (OBR) over its pessimistic oil forecasts when compared to the Department of Energy and Climate Change (DECC).
He wrote: “The OBR 2012 forecast was that, by 2017-18 the oil price would be down to almost $90 per barrel, some $30 per barrel below the 2012 forecast of DECC.
“The latest OBR forecast is that the oil price will be some $99 dollars per barrel in 2018-19, still well below the central DECC forecast of $128.
“Danny Alexander appears not to have discussed this gap with DECC, even though DECC is run by a member of his party and of the coalition.”
Welcoming Professor MacKay’s article, SNP Treasury Spokesperson Stewart Hosie MP said:
“Professor MacKay has been studying oil reserves and the economics of oil for over 40 years now, so there can be few people with greater expertise in this sector.
“His analysis of what the Treasury and the No campaign are saying about the oil & gas sector is a significant blow to their credibility.”
“We have seen record investment in the North Sea in recent years entirely because companies are determined to boost production.
“And as the recent Wood Review proposals earlier this year made clear, we have the opportunity to enhance the economic value of our oil & gas industry by £200 billion over the next 20 years.
“Coming alongside the report by the Expert Commission on Oil and Gas which shows that through consultation, a commitment to certainty for the industry and an oil tax regime that supports both the industry and public revenues there is huge potential in the North Sea for years to come.
“Instead of continuing to talk down Scotland’s oil & gas sector, the Treasury should acknowledge that the sector has a bright future ahead of it.
“With a Yes vote in September we will be able to ensure that the sector benefits from a more stable taxation regime instead of being subject to surprise Treasury tax grabs – maximising the jobs that the industry creates and ensuring that Scotland’s resources are used to the full benefit of people in Scotland.”