LONDON-Amidst the type of fanfare generally reserved only for royal births, deaths, and marriages, Britain has exported its first ever shipment of oil. It was admittedly not very impressive by Saudi Arabian or Kuwaiti standards—one 50,000-ton tanker to West Germany from the North Sea oil fields-but to judge by the press and government reaction you would have thought Britain had regained its place as the mightiest economic power on earth.
Industry Minister Benn declared that this was the culminating point of an "outstandingly successful year for exploration with 24 new discoveries-nearly as many as in the previous five years of exploration" and that proven reserves had increased by over 27 percent from 1,060 to 1,350 million tonnes. (The Times, April 30, 1976)
By now, however, the population of Britain should be getting used to these "outstandingly successful years. " When in November 1975 the first North Sea oil came ashore in Britain, Queen Elizabeth, in a speech carefully prepared for her by the government, announced that this was an event of "outstanding significance in the history of the United Kingdom." To celebrate, it was felt necessary to spend $1 million for a gigantic reception, with most of the royal family, virtually the entire Cabinet, and 1,000 notables in attendance.
Despite the celebrations, however, there is no doubt that cynicism about such "triumphs" is growing. After all, living standards for the working class have fallen 6 percent in as many months. Furthermore, despite all the cheering, things don't seem to be proceeding on quite such a wondrous level as everyone had been led to believe.
Despite Benn's "outstandingly successful year," the government had to admit that projected production figures by 1980, when production should be reaching full scope, have been reduced from 100-130 million tonnes a year to 95-115 million tonnes; that of the twenty-four discoveries last year only one-that of the Statfjord field, which is in any case shared with Norway-was commercially exploitable; and that present oil production, from the Argyll and Forties fields, is, at 1.1 million tonnes, at the absolute bottom end of even the most pessimistic government projec tions. (The Times, April 10, 1976.)
Furthermore, despite the bluffing and boasting on Britain's supposed colossal new economic power, the government was put very smartly in its place last autumn when the European Economic Community, under the prodding of West German Chancellor Schmidt, rejected British demands for a separate seat at the international energy conference. This last rebuff was so sharp in fact that the left social democrats of the Tribune group who, as good reformists, are prepared to grasp at any straw and had therefore been lauding North Sea oil to the skies, felt it necessary to run a black-bordered box on the front page of their newspaper December 5 deploring this "betrayal of British interests."
In the light of the fanfare in Britain and the apparent indifference "overseas," it is perhaps worth taking the occasion of Britain's entry onto the scene as an "oilexporting nation" to see whether British capitalism has at long last found a way out of its difficulties, whether other imperialist powers should now be quaking in their boots before the onslaught of a new British colossus, and what, if anything, the British working class stands to gain from the "outstanding achievement."
A Miserable Fraud
The reality of the situation is that North Sea oil is one of the worst, but most expensive, con tricks in the world-and one bought at the cost of deprivation through artificially inflated oil prices for both the British working class and hundreds of millions of people in the colonial world.
The actual oil reserves of the North Sea are pitiful. Taken as a whole, they account for only 2% of the world oil reserves—with the British sector accounting for a mere 1.25%. This is lower than Venezuela (2.7%) or Nigeria (3.8%), let alone Saudi Arabia (25.2%), Kuwait (12.2%), Iran (11.4%), ete. ("Make or Break?" supplement to The Economist, July 1975.) Furthermore, by the time it comes fully into operation in 1980, the North Sea will be facing competition not merely from the Arab East but from new sources such as the 2.5 million barrels a day forecast from the North Slope Alaskan fields. ("Oil, the Gulf and the West," supplement to The Economist, May 1975.)
A further crucial factor for North Sea oil, and the manoeuvres of the British government, is that oil extraction from the North Sea fields is quite extraordinarily expensive-the capital cost per barrel-aday capacity is £2,500 [E1=US$1.77] compared to £100 in the Arab Gulf and £900 in the Gulf of Mexico. ("Make or Break?" op. cit.) This is despite the fact that the methods by which the oil companies obtained the North Sea sites must be one of the most extraordinary rip-offs of all times-some of the lots went for a mere £2,000 compared to £39 million for twentyfour square miles in Alaska. (The Oil Fix, Counter Information Services, London, 1974.)
The Cost and the Return
The result is that the cost of production in even the most economic fields of the North Sea is $2 to $3 a barrel, compared to $1.20 to $1.50 in the Arab Gulf. For most of the North Sea the extraction cost is $4 to $6 a barrel. ("Make or Break?" op. cit.) The result of this situation is that of the probable 20-25 billion barrels of reserves, only 6-8 billion is commercially recoverable at current prices. The capital cost of starting serious production by 1980 is likely to be $16-20 billion. (The Financial Times, April 27, 1976.)
It is only the desperate economic needs of the British ruling class, and the desire of the oil giants to find alternative sources of supply to the Arab East, that leads to such investments in otherwise economically irrational projects. (For the oil companies' motivations, see "The Arab Oil Boycott: A Conspiracy With the Trusts?" Intercontinental Press, January 28, 1974, p. 75.)
With such small recoverable reserves, and such a high cost of production, the contribution of North Sea oil at the present price to the British economy can only be pitiful-after payment of debts on the $16- 20 billion necessary to reach the projected target of 3 million barrels a day, the benefit to the economy is probably only 0.8% of Gross Domestie Product a year for 6-7 years. (The Financial Times, November 4, 1975.)
Any fall in the price of oil would of course drastically reduce even this effect— particularly when the whole operation makes any sense at all only if oil can be exported, since only 35% of Britain's oil consumption is in the light crude grade that comes from the North Sea fields and the other 65% heavy crude will have to continue to be imported anyway.
The operative word, however, is that these figures refer to the present price. If prices can be increased significantly, then the whole project takes on a very different aspect.
As a result, the British government, despite its public attacks on "exorbitant" oil prices, is one of the chief campaigners on an international scale for an increase in the price of oil. This was indeed the issue on which it clashed with Schmidt and why it wanted a separate seat at the international energy conference in the first place.
Furthermore, while the British government is easily put in its place by the West Germans, it possesses a very powerful lever in its half stake in the British Petroleum Company (BP)-one of the "Seven Sisters" of the oil giants and the fourth largest non-American corporation in the world. This already provides useful services to the British government, such as dealing with "politically sensitive" issues like aiding South Africa to withstand any threat of boycotts or sanctions.
For example, in March 1974 Sir Eric Drake, the company's chairman, visited Johannesburg, where "he had held discussions with Mr Vorster, the South African Prime Minister, and officials about the ways in which BP could make a contribution to the local coal utilisation situation or in any other way that is useful to South Africa and BP'" (The Financial Times, March 4, 1974.)
Other interesting aspects of this company's activities have also come out with recent revelations concerning its methods of political payment in Italy. The real dimensions of this have almost certainly not yet even been partially exposed.
BP itself admits to payments of £800,000 to parties in the coalition government. However, its statement carefully referred to these payments as those which "are the subject of investigation," and nobody believes that this is anything but the tip of the iceberg. Further, BP's official auditor, Whinney Murray, admitted delicately that "audit tests by their very nature would not necessarily uncover "illegal payments.' Indeed they are not necessarily designed to do so." (The Financial Times, April 14, 1976.)
The British government, which as a mere half owner of the company would naturally have no way of knowing what was going on, has of course said how surprised and shocked it is—although of course as "business expenses" such payments are probably even tax deductible.
Apart from their general operations and links with the oil cartel, those firms which operate in the North Sea have their own more direct methods of squeezing out extra pennies. While the real increase in the price of oil which is needed to make the North Sea profitable involves an agreement with OPEC, and it is this which the British government directly and indirectly is putting its attention to, the British consumer can also be squeezed for a bit of ready cash for the companies.
In the last six months or so, the chief oil companies have therefore been putting a great deal of their attention to forcing out of the market various "rogue" importers who were undercutting the outrageously inflated prices of BP, Shell, Esso, etc. This was done by artificially dumping oil on the market to undercut the competitors while simultaneously cutting off the sources of surplus oil which the "rogues" had been purchasing.
To achieve this, Shell-BP-Esso cut their petrol (gasoline) prices to 71.5p a gallon (about $1.40). By the end of April 1976, they had succeeded in cutting off the rogues' source of supply and underpricing them so effectively that they finished them off as competitors.
On May 1, the major companies immediately raised their prices to 79p a gallon ($1.55). The government, which is supposedly on a "price restraint" policy, made no official comment, but through unofficial sources "let it be known" that an important consideration in its policies was "the protection of the small garage owner" who was supposedly injured in "price wars." The protection of garage owners who are not so little obviously wouldn't have figured as a calculation!
The reality of what is taking place in the North Sea is quite clear. British imperialism has found common interest with the oil giants, who for political reasons, and questions of leverage, like to have certain alternative sources of supply to the Arab East. The costs of these developments, however, are vast and someone is going to have to foot the bill in the greatly increased oil prices necessary to make them economical.
That "someone" is naturally not going to be Esso, BP, British imperialism, or any such worthy. The cost will be borne by the British working class in inflated prices and the countries of the "third world" such as India, Zambia, and others that are bearing the full brunt of the oil price increases. Meanwhile, the statements by Her Majesty, the press fanfares, the continuous "outstanding achievements," serve only to conceal the real "astounding achievements" of a company like BP, aided and abetted by the Labour government, seriously attempting to present as a great victory for the "British people" the fact that it has exported 50,000 tons of oil, for which it receives the profit, in the same week as it puts up petrol prices by 10%-for which the working class foots the bill.
British imperialism in its death agony appears to be attempting to follow the maxim of the Roman emperors that if you can't give the people bread then perhaps a circus will keep them happy.