1980s >> 1986 >> no-986-october-1986

Too much oil?

Many ports on the east coast of Scotland have recently had the strange sight of rows of oil rigs moored along the shore. This does not reflect any great new oil discovery, but the current slump in the world market. The “over-production” of oil, resulting in a fall in price to under ten dollars a barrel, meant that many of the fields in the high-cost North Sea have become “uneconomic” and has virtually ruled out any new explorations.

The bright future that North Sea oil was supposed to bring to Scotland’s economy has not arrived and few Scottish Nationalist politicians now bother to bring out that empty phrase. “It’s Scotland’s Oil”.

The effects of the slump in the oil industry are continuing to be felt. Many workers who believed that the industry offered security and high wages are having to get used to replacing their wages with thirty pounds a week on the burroo. The benefits that their high wages enabled them to enjoy are becoming the burdens of mortgage and HP repayments.

Those still employed in the industry are feeling the effects as well. In an effort to retain profit margins, wages are often the first targets of any employer, and these have been reduced, often sharply. Previously, wages have been paid for the whole of the “two weeks on. two weeks off ” period commonly worked on the rigs but now many are being paid only for the time actually spent off-shore. Expenses that the workers received are being cut back; many are having to buy their own meals.

The unions are unable to do much about these cuts. They are not strong in the higher paid, higher skilled parts of the industry and the workers where they are organised have not much muscle anyway. In any recession, however, the union s position is always weak.

The service and supply industries are also feeling the pinch. Two of the four refabrication yards in the Moray Firth are facing closure. as the reduced amount of work makes them surplus to requirements. This area already has high unemployment. In Aberdeen, there are other industries and employers but the small towns of the Moray Firth have no such hope.

Oil-rig construction in Scotland has been dead for some time and the current slump has only emphasised this. Even if things do pick up it is estimated that the North Sea is about at its peak production and will soon start to decline. Anyway the “surplus” rigs can be brought back into production. The boat yards on the east coast which hopefully viewed the oil industry as an alternative to the decline in shipbuilding, have a grim future.

The OPEC conference at the start of August may offer the industry some respite. It surprisingly agreed to restrict production to beneath the current world demand, in an attempt to force up the price and clear the current glut. It succeeded in the first aim anyway, as the price shot up by four dollars a barrel when the news broke.

Whether the agreement will last remains to be seen. The market for oil remains very depressed and the underlying cause, the world recession, shows no sign of ending. The temptations to bust the cartel are very strong. Many of the oil-producing countries are desperate for revenue and have been hit hard by the slump. Britain, which is not an OPEC member, is continuing to produce at full capacity; OPEC has been annoyed by this and by British oil interests benefiting from its cartel. Some of its members may not restrain production for long.

The unusual factor in the OPEC deal was how the agreement was reached. The main stumbling block had been Iraq, who claimed that it should get special dispensation as it needed the revenue to wage war on Iran. Ominously, at the conference, Iran itself agreed to this saying that it would pursue “other means” to cut back Iraq’s production levels. How many more lives this will cost remains to be seen. This war has already cost the lives of hundreds of thousands. The price of oil is sometimes very high.

In a sane society, oil with all its benefits would be used as it could be, solely to satisfy human needs. Such terms as “price”, “profit levels” and “uneconomic production” would become meaningless. It is not the price of oil that really determines whether it can be extracted but the cooperative effort of human labour, using all its skill and techniques, which allows such inhospitable places as the North Sea to produce an item of such great benefit.

Ian Ratcliffe