North Sea Oil Prices to Rise by 2018
Posted on: 14/10/2015

Scottish businessman Jim McColl has predicted that oil prices will rise again by 2018, kick-starting economic activity in the North Sea again. The billionaire businessman was selected for a new £97 million contract to build two ferries, believing that the North Sea is ‘still a viable area’ and that ‘prices will go up’.

An increase in oil and gas production contributed to the 0.7% rise in the UK economy, which was announced this week. However, this percentage has yet to feed through to the Scottish onshore economy, leaving Scotland’s GDP falling behind at just 0.1% growth.

McColl said: “In our own business, the North Sea is actually holding out quite well and the Middle East is holding up quite well.

“The Gulf of Mexico is the hardest hit but the reason this is all happening just now is that we have an oversupply of oil.

“Demand is lower than supply and we have an oversupply because the Americans did all this fracking and the Middle East, the Opec countries, are ramping up their output to keep their market share.

“The fracking in the US has turned down, the jack-up rigs in the Gulf of Mexico are down at 20% now and all the indications are that when we work through this oversupply just now and the surplus that we have, demand is going to overtake supply around 2017, maybe 2018, and the price is going to go back up again and activities are going to start again.

“So it is a huge shock in the short term, but it is still a viable area in the North Sea and prices will go up.”

Fellow economic adviser Anton Muscatelli, Principal of Glasgow University, confirmed Scotland’s economy would have contracted last quarter if it was not for publicly funded construction activity. “The UK’s figures were boosted by increased production in oil and gas, but this is attributed to the UK as opposed to being attributed to Scotland.

“One thing which was, I gather, particularly strong in these figures, which helped at least maintain them at that level, is construction which is fuelled by public investment. “Obviously if there are going to be cuts in capital spending to the public sector, then that feeds through to the Scottish block grant and that will have an impact on growth.”

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