From The Sunday Times:
The primary culprit for this collective collapse is the oil price. Brent crude has plunged from $115 in the summer of 2014 to $33 (£23) a barrel last week...
And so on.
Extraction costs in the North Sea are about $40 (£28) a barrel, so that looks like a loss making position, does it not (until and unless the oil price rises again, as well it might)?
Actually, it all depends on how stupid the UK government is.
The pump price of a liter of petrol is currently about £1. Ten pence of that is refining, transport and retail costs; the cost/value of the petrol/diesel is about 19p*. The other 81p is fuel duty/VAT collected by the UK government.
For North Sea producers to remain viable, they have to be paid at least £28 a barrel, call it £30 to give them a bit of leeway. If the fuel duty/VAT on petrol/diesel from the UK part of the North Sea were reduced by 16p from 81p to 65p, then the petrol/diesel could still be sold for £1/litre** and would thus be competitive with slightly cheaper foreign-sourced fuel.
This 16p a liter notional shortfall is halved once you take other tax receipts from oil companies and their employees into account (about one-third of the 25p a liter they receive = 8p?). Whether this 8p shortfall is worth taking on the chin depends on...
- how important the oil industry is generally.
- the general health of the Aberdeen economy in particular.
- savings in welfare payments.
- whether you want to reduce UK trade deficit (each barrel not imported reduces out trade deficit by 19p).
- the importance of retaining oil-sector skills for invisible exports.
Whether it is or not I do not know (but I strongly suspect it is).
* One barrel = 159 litres costs £23. Three-quarters of that can be turned into petrol or diesel and the rest is other stuff. £23 divided by 120 litres = 19p.
* £30 divided by 120 litres = 25p, plus 10p refining, plus 65p fuel duty/VAT.