Sky News business editor Michael Wilson

First a bank summit, then a supermarket summit, and now, marching up to the top of another hill, Gordon Brown and Alistair Darling meet oil industry leaders in the rugged slopes of North East Scotland.

Apparently they’re keen to avoid talking about tax – there’s a surprise – and would rather address the problems of rising cost and supply.

The roustabouts of North Sea oil will probably react rather coolly to the Scottish duo. There’s plenty of oil and gas around..or rather underneath. So far 37bn barrels produced, and 25bn still ready to be exploited.

But however much our leaders don’t want to talk about it, a major crimp in the pipeline is taxation. Production is taxed at between 50 and 75% depending on the age of the field. As recently as 2005, the then Chancellor Gordon Brown added another 10% to the corporation tax paid on new fields. The UK Oil and Gas trade body (UKOG) says that of  the £5 to £6 billion invested each year, less and less is getting through to actual production because of rising tax costs.

As a result, oil and gas production from the North Sea is expected to fall by 10% over the next few years, and we become that little bit more dependent on the international oil cartel’s whims. Furthermore,  UKOG notes that as a result of tax levels, the UK is getting less and less attractive to the overseas companies who might otherwise be tempted to enter the business.

Now today’s meeting is scarcely OPEC level and our leaders have acknowledged that there’s little they can do from these small islands to influence the crude shock of the oil price..except, of course, tax it less.

Comments

[Robert, Scotland 28 May 2008 13:44:20]

What with increased oil prices and the sub-prime mortgages, is is finally acknowledged within New Labour that this Island economy cannot exist on its own. When the World markets sneeze we catch a cold. Given that we had no reserves of money, oil and nowhere to store the gas we now have to import it defies belief that any other thought persisted.
This realism that we are subject to the vagaries of World markets should lead to another delusion being demolished. The United Kingdom cannot do unilateral carbon reduction. The Green lobby (who are driven by the need for next years funding grant) must recognise the World did not get to its current state overnight and that any reversal will take time (decades).
The first decade should be about recruiting allies to the cause, only when reasonable numbers are clearly established should we move to the next step. The creation of a level playing field through tax harmonisation across Country borders.
Anomalies like these listed below must be addressed or people through a sense of injustice will not accept the tax as green, it will be viewed as opportunistic tax raising using a worthy cause as a cover;
Fuel tax in Holland 29p in the UK, 57p.
Disel fuel cheaper in the rest of Europe with the exception of the UK.
Clumsy taxes like the planned vehicle excise duty only reinforces the publics perception that the green issue is hi-jacked to raise taxes. Especially when there is a simple green opportunity which would have been the perfect "vehicle" for a carbon reducing tax: Increase the purchase tax on new vehicles, as 90% of all new buys are company and fleet hire, this would not hurt the poorer who can only dream of buying a new car. The green credential would be established and the second- hand buyer would carry on the good work.

[Khalid 28 May 2008 13:03:17]

Sir
Naturally the well-being of many a local economy is duly assisted by revenue generated by way of taxation, however, as you inform herein, unless a nation is competitive on a global basis, new and emerging ideals from investors overseas will further deprive those nations wanting to enhance local customs, to such levels that the pace will be slower than that of a snail.
As with every industry, whether they be [Hunting High Or Low] an element of greed does play a pivotal role, whilst they somehow overlook long-term gains-v-losses, suffice to say that one day oil will run out and those nations who rely upon international usage will wonder how they will cope whilst those being deprived will have moved on and found newer and cost effective ways to fuel many a fire.
Now, for the benefit of all man kind, OPEC can enforce the fixing of the price of a barrel full of oil, having years of practice in that field, and allow the world to become healthy, whilst it itself becomes wealthy.
The sad thing though is that despite all this wealth, the main focus appears to be the demise of mankind as oppose to the creation of sustained communities. So, come on lads lets rip through the lower price barrier and bring it down to $75 per barrel. Dont rush as you might slip!!!!!![Aha] nearly forgot the forecourt, get ready for £0.75p / litre with or without lead. (Bismillah) the wonderful smell of mixed gases.

[Michael Cornwall 28 May 2008 12:54:39]

At least Gordon Brown is going up there to talk , maybe he can start to make some progress. A little bit more on how we are faring in Cornwall,with rising fuel prices. Personally I have seen suppliers making us take twice as much to keep transport costs down, which is scary.I have also seen yesterday one of the largest wholeslers in UK running with half empty lorries,unheard of, the driver said they were very quite ,unheard of. I had another large wholesaler phone me up for £45 as I wrote the cheque out incorrectly,unheard of.I will try and talk to some fishermen to see how they are faring with the fuel.No one has mentioned them and in Cornwall we cant leave them out.