It was much the same tale with North Sea oil. When it was discovered we were told that the UK citizens were going to be in for a bonanza and we would all become nice and wealthy on the back of all the lovely free revenue that was generated. Evaluating the impact of 40 years of pumping oil on the UK economy is not easy but there is a really strong case to be argued that it has actually had a negative effect not a positive one.
The main thrust of the argument is fairly straightforward. Instead of funding investment in new technology and helping the UK to build a prosperous economy the money went on raising the value of the pound beyond the level that UK industry could compete at. Consequently UK industry has declined steadily throughout the time that the oil has flowed into the country. Manufacturing was close to 40% of the UK economy when the oil started to come in. It is now close to 10%. We have learned to live off capital instead of steadily earning our living.
Of course a lot of that change would have happened anyway and it is not necessarily a bad thing to have a service orientated economy. But many high tech industries could have competed much more successfully if it were not for over high costs brought on by a currency propped up by oil and some very dubious attitudes about how the country could prosper.
It is not entirely a co-incidence that the pumping of oil happened at the same time as the transformation of London into a home for a great deal of the dubiously sourced money of the internationally rich. London house prices may be totally unaffordable for young local workers but they represent a highly attractive way of storing revenues extracted from some very poor countries by their corrupt governments. Much of that money stems from oil revenue. Would the UK have been quite so welcoming to these horrible parasites if we hadn't been busy doing our own business with the oil companies?
Compare the success of the German economy, particularly in manufacturing, and the continued decline of the UK in terms of the success of long term stable industry or productive service economy jobs. The UK has run a massive balance of payments deficit for decades. Some of it has been financed by the inflows of dodgy capital and some of it has been covered up by a stream of free money coming from oil licences. Desperately little has been done to address the core problem by investing in modernising UK industry or building up new skills in the UK workforce. Germany has managed to preserve a modern successful industrial and commercial base despite fierce competition from China and has tended to maintain a healthy balance of trade.
The key difference might just be down to not having the distorting impact of oil revenues, particularly on attitudes of mind. German business appears to be happy to work in tandem with the state to invest in the future and vice versa. The UK government appears to think that working with industry to invest in change is somehow morally wrong.
Right now the German government are busy pouring resources into switching over to Green Energy. It is a popular policy. It helps free them from dependence on unreliable Russian oil and gas. It means that more of the money they spend on energy goes to generate high quality high tech jobs for German people with all the spin offs into other industry and enterprise that this generates. It means that less of their money goes to Mr Putin's robber state or the Saudi funders of religious terrorism. It helps drive the supply of energy up worldwide at the same time as Germany's serious investment in energy conservation cuts the demand.
Worldwide, more and more states are copying Germany's example. Particularly China and, to the degree that Obama can get the legislation through, also in the States. With the Paris agreement on climate change action it is now virtually inevitable that renewable energy technology will expand rapidly and get more efficient. We can expect a massive increase in generation from renewable sources, a massive improvement in storage technology and a massive drive to reduce use via better conservation.
When supply goes up and demand is controlled the impact is almost always a lowering of price. That is exactly what has happened to oil prices recently. We might finally be looking at an energy technology that can deliver more than it promises. We've all been told it is necessary to accept higher costs to invest in a more sustainable alternative. It is now looking like what all that investment does is drives down the overall market price for energy very nicely. We therefore look like we might get lower prices as the benefit of increased supply of a more sustainable alternative.
What is the point in oil states keeping their reserves in the ground if ten years from now they are going to be a much smaller proportion of world energy markets? Faced with this question many of them are choosing to pump it now and sell it before the competing technology really gets off the ground. No wonder the market is saturated. The Saudis are busy trying to sell off a large stake in their national oil company so that they can diversify. I can't say I blame them. I wish the UK government was looking at the future with an equally hard head.
Faced with the potential for a huge switch onto a new generation of technology of low energy consumption devices and renewable energy the UK government appears to have decided to ignore the key lesson of economic history. They are trying very hard to invest in the last wave of technology and to reduce their investment in the future. Every measure that the government can find that subsidises or encourages a switch into greener energy sources or reduced consumption has been dumped since the 2015 election. Instead they are trying to force through fracking and further oil exploration in the hope that this will provide another thirty years of living off fossils.
Forty years of dependence on oil revenues has left the UK government incapable of imagining a different type of economy. If they remain incapable of understanding the future of technology then maybe the UK people might just reverse the equation. If our government can't imagine a different type of economy then surely the time has come to imagine and create a different type of government.