Stop the decline spiral

In the wake of the sharpest and most sustained drop in the price of oil in decades, the UK oil industry is staring into an abyss as more than a hundred thousand jobs have gone in the last two years alone and investment grinds to a virtual halt.

Although oil prices have experienced a modest bounce in recent months, experts agree that lower prices for longer is the new normal.

The state of the beleaguered industry prompted Chancellor Phillip Hammond to announce in the government’s budget yesterday (March 8) measures seeking to help. He outlined a panel that would oversee certain North Sea tax rules that could help jumpstart more investment.

The timing couldn’t be more appropriate – just days before Hammond’s budget, Unite launched the publication of its new strategy for the oil industry, Wells to Wheels, developed with the help of Unite reps along with specialist researchers and assistance from industry bodies such as Oil and Gas UK.

“We’ve put out Wells to Wheels because we realised that there was nothing like it out there right now, just when the industry needs a proper strategy more than anything,” Unite national officer Tony Devlin explained.

“We have long been calling for an oil and gas summit which would bring together trade unions, industry bodies, all governments including Westminster and the devolved governments – basically all the major stakeholders – to devise an action plan to ensure the industry’s future,” he said.

Union voices not included

Hammond’s plans for an oil ‘panel’ is in line with what Unite has lobbied for, Devlin noted, but it’s woefully inadequate because it only looks at part of the picture and hasn’t expressly included the voice of trade unions.

“A ‘panel’ that’s worth its salt must go beyond just looking at tax rules or the offshore part of the industry,” he said.

“We need a wholesale industry review from top to bottom which examines exploration and production as well as refining, all the way downstream to fuel deliveries – from, as we say, ‘wells to wheels’. We need a plan that looks at the future of skills, at job security and diversification – with trade unions having a seat at the table.”

Unite’s plan to secure the future of the industry also includes calling for a favourable future trading arrangements post-Brexit to ensure a stable environment for investment; improving the UK’s energy security; developing a coherent future jobs strategy to meet the challenges of decarbonisation; reforming fuel duty and establishing a stronger role for trade unions in health and safety bodies, among other measures.

Beyond the sustained drop in the price of oil, the industry must come to terms with the reality that oil in the North Sea will eventually run out – at current extraction rates, this could take 20 to 40 years. The urgent need to decarbonise the economy to avoid irreversible climate change also hangs heavy over an industry that sustains hundreds of thousands of jobs.

National conversation

Unite hopes that Wells to Wheels becomes the centrepiece of a national conversation that spurs governments, companies, industry bodies and trade unions to coordinated and decisive action.

“The oil industry is simply too important to allow it to spiral into decline,” Devlin said. “It not only fuels our vehicles and powers our homes but oil is used in a vast array of household products, and it’s in our roads, too,” Devlin noted.

“You could say that there isn’t anything as we go about our daily lives that isn’t somehow touched by oil. When the price of a barrel of oil drops, it affects the entire global economy – that’s how important this industry is.”

Indeed, the UK oil and gas industry alone provides over 70 per cent of our primary energy needs, accounts for over 90 per cent of transport fuels and employs nearly half a million people directly and indirectly.

“UK energy security is also a key issue,” Devlin highlighted. “Geopolitically, as the world becomes less stable, the need for the UK to be energy self-sufficient becomes ever more urgent.

Despite the challenges, Devlin said Unite remains hopeful.

“With the right set of policies, and with genuine will and determination the UK oil sector can provide sustainable and secure jobs for our members long into the future.”