Mark Carney: Falling oil price ‘negative shock’ for Scotland
I am not usually a conspiracy theorist. My whole life has taught me however that those with the control of the resources rarely lose out in the long run. Whilst we are all celebrating the short term impact of lower fuel prices I do fear we might reap a long term financial headache. The downturn in the North Sea oil industry is one of the first indicators that this is not universally good news. I fear deflation and global instability will (in this very small world) will bring unintended consequences which might wipe the smiles off our faces. I am becoming a bit pessimistic in my old age I fear! This story tells us (and don’t forget the north sea oil supply chain stretches down into England):
Scotland’s economy is likely to be harmed by the collapsing price of oil, the Governor of the Bank of England has said, although most of the effects will be offset by the country’s position in the UK.
Mark Carney told MPs on Wednesday that while the halving of oil prices in the past six months is a “net positive” for the UK, this was not the case in Scotland, whose economy is far more vulnerable to the fortunes of the North Sea oil industry.
“It is a negative shock to the Scottish economy, but it is a negative shock substantially mitigated by the fiscal arrangements in the UK,” he said, suggesting that the blow to Scotland will be cushioned by its union.
Oil has fallen from more than $110 a barrel in July to less than $46 on Wednesday. When Scotland voted to remain in the United Kingdom on September 18, oil was trading just below $100, and the recent developments are seen as weakening nationalists’ case for independence.
The recent declines in the oil price sent inflation in the UK down to 0.5pc in December, a 14-year low. But speaking to the Treasury Select Committee of MPs, Mr Carney repeated his claim that low inflation is unlikely to turn into a problem, and distanced it from the current deflation gripping the eurozone.