Oil markets are on edge again. With the price of Brent crude fluctuating amid the ongoing Israel–Iran conflict, you’d think drilling more in the North Sea would be the obvious fix for UK households drowning in energy costs. You’ve probably heard the claim: if the UK just drilled more oil and gas from the North Sea, we could reduce our reliance on imports and bring down energy prices. It’s a line repeated by politicians and industry figures alike. But even in a storm of geopolitical shocks, more domestic extraction won’t shield us from global price swings or cut what we pay at the pump or on our heating bills.
North Sea oil is not reserved for domestic use. It’s extracted by private companies who then sell it on the global market to the highest bidder. It doesn’t stay in the UK, and it’s not priced for UK customers. That means that even if it’s drilled off the coast of Aberdeen or Shetland, it could end up in China or the USA – whoever pays the best price. The UK then buys back refined oil products, particularly diesel and jet fuel, at global prices, just like everyone else. And even though the UK is a net exporter of petrol, the price you pay at the pump is still determined by the global market.
Even if we wanted to keep more crude oil here, we couldn’t do much with it. The UK, and Scotland in particular, has very limited capacity to refine crude oil. With the closure of the Grangemouth refinery, Scotland lost its only crude oil processing facility. That refinery accounted for 14% of the UK’s refining capacity. Now the crude oil we extract is mostly exported for processing, and we import refined products back in. In 2023-24, UK net imports of refined oil products surged by 60% to 11.5 million tonnes, the third highest on record.
The same goes for gas: even though we produce a significant amount in the North Sea, prices are set by global markets, and UK consumers still pay international rates — especially for heating and electricity.
More drilling can boost tax revenue or support jobs in the industry and supply chains – laudable, and you might reasonably think this justifies more drilling on its own – but we need to be honest about what more drilling won’t do. It won’t protect us from global price shocks. It won’t lower bills for consumers. And it won’t make us meaningfully less reliant on foreign energy.
If we want real energy security and affordability, we need to fix the actual problems:
- We need to invest in renewables that aren’t tied to global oil prices.
- We need to insulate homes so we use less energy in the first place.
- And we need to reform the energy market so that cheap, clean electricity actually leads to cheaper bills.
More drilling might sound like a solution – but it’s a distraction. The real answers are already within reach: clean energy, better infrastructure, investment in energy storage, and a fair transition for those in the industry. A fairer energy system is possible, but only if we stop pretending the old ways still work.
* Neil Casey is Vice Convener - Policy, Scottish Liberal Democrats. The views expressed in this article are those of the author and do not necessarily reflect the policy of the Scottish Liberal Democrats.
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8 Comments
Brent crude price 17/Jun $71.4. Don’t know where you get your
$90 from.
Fawley refinery near Southampton provides 20% of the UK’s refining capacity, producing all grades of refined product and oils, together with the chemical works next door.
Reformiing the electricity market would be good. I suggest nationalising the gas fired power stations and removing standing charges altogether.
It would be good to clarify whether you are actually talking about “energy”, which would include transport and aviation fuel, gas for heating, other fuels for cement, steel , aluminium manufacture etc, or
“electricity” which is reasonably easily replaced when the wind is blowing or the sun is shining by renewables, but only makes up about 30% of total UK energy demand.
PS Brent crude is predicted to be below $60 bbl in 2026. I wouldn’t bet on it though.
So, more oil production in the UK will increase the amount raised by Petroleum Revenue Tax. The government could then use that extra revenue to reduce the rate of VAT on domestic gas and electricity, or reduce the duty paid on fuel at filling stations.
Indirect, but more oil production leading to a cut in energy costs.
Very interesting and made me think about the contrasts with Norway where their citizens do seem to more directly benefit from their oil reserves. Norway channelled profits from their oil into the Government Pension Fund Global— apparently the largest sovereign wealth fund in the world. The Norwegian state uses revenues to fund public services, infrastructure, and national savings—making the population direct beneficiaries of oil wealth. In the UK taxes on oil production have been much lower and revenues were absorbed into general government spending.
Britain’s failure to establish a sovereign wealth fund for the proceeds of north sea oil and gas possibly the worst decision taken by government in my lifetime. Oil and gas in the ground was a capital asset – to p*ss it way on day to day spending/tax cuts was deeply short-sighted.
Personally I think reform of the energy market is necessary – so the the cost paid by consumers follows the cost of supplying the energy – we all know that today the market follows the cost of the expensive gas rather than the cheaper renewable. The problem is as I understand is the base load problem – ensuring there is always enough supply when the wind isn’t blowing and the sun isn’t shining. The support for nuclear is good news but why oh why no large scale experiments with tidal like the Swansea tidal lagoons?
@ John Hills,
“Norway channelled profits from their oil into the Government Pension Fund Global— apparently the largest sovereign wealth fund in the world.”
Norway channels money into a Sovereign Wealth Fund in order to export capital and so keep the Norwegian krone from becoming even more expensive than it is. If anyone thinks London is expensive ……….
We could do the same but do we really want the pound to fall in value. I don’t think this would be a bad idea but I have to admit that this is a minority view.
Having said this there was no reason why we couldn’t have nationalised the oil industry, either fully or partially, and/or extracted more of the generated wealth via the tax system.
It’s a bit late for that now, though.
Use less oil or kill the planet. Extra revenue just makes rich people richer. Govt may piggyback on to increase the tax take. Short term fix. Long term extinction.
” the base load problem – ensuring there is always enough supply ”
It’s not really a baseload problem. It’s supplying enough despatchable power – ie that can be turned on and off as required. Nuclear stays on all the time, as the cost of fuel is negligible, so you could call that baseload. When there’s a lot of wind or solar, the marginal cost of supply is very low, so it gets used, while the gas fired despatchable power is turned down to compensate. When the sun goes down and demand goes up ( see mid evening yesterday 17/6 on Gridwatch) renewable power drops and the gas has to be ramped up to compensate. Dinorwic ( hydro power storage) can provide short term despatchable power. If your gas fired power station only gets used for peak loads, the capital costs need to be covered during those peak loads, so the cost per unit goes up. The problem is that renewables don’t provide power when it’s needed, just when it’s available, while demand for electricity assumes it’s always available as required. The cheapness of renewables is an illusion unless we can run the country with regular blackouts.