Scotland Bleak Outlook Without Oil

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An independent Scotland would have a bigger budget deficit than any other country in the EU including Greece, according to figures published yesterday.

In a development that raises question marks over the SNP’s push for independence, annual figures showed that the shortfall in the Scottish economy is being met by taxpayers from the rest of the UK. The figures setting out Scotland’s fiscal position for 2015-16 revealed that the size of its deficit, at £14.8 billion, was up £500 million from the year before.

The statistics also reveal how devastating the collapse in the price of North Sea oil.

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Oil is by far the world’s most-traded commodity, with $786.3 billion of crude changing hands in international trade in 2015.

While low commodity prices can hurt any major producer, oil prices can have a particularly detrimental effect on oil-rich economies. This is because, for better or worse, many of these economies hold onto oil as an anchor for achieving growth, filling government coffers, and even fueling social programs.

If those revenues don’t materialize as planned, these countries turn increasingly fragile. In the worst case scenario, an extended period of low oil prices can cause the fate of an entire regime to hang by a thread.

Just as the discovery of North Sea oil transformed the prospects for Scottish nationalism in the 1970s, so the collapse of the oil price has destroyed its economic rationale today. America has mastered fracking and doesn’t need to import much oil now; this has helped depress the price of a barrel from $110 to $30. Such prices mean less North Sea tax revenue, but the average motorist is also spending about £30 a month less at the pumps. For the UK, the stimulus from cheap petrol generally balances out the effect of lower North Sea receipts: a country of 60 million can absorb such shocks. A separate Scotland could not.

By Des Briton

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