Energy resource development and the British economy: A review

Abstract

The last decade or so has seen major changes in the structure of the UK economy. There has been a continual decline in manufacturing, both relatively (not unique to the UK) as well as absolutely (unique to the UK of all the major industrialized economies), while the discovery and exploitation of oil in the North Sea has moved the UK from a position of total dependence on imported oil, through self sufficiency, to its becoming a significant net exporter. Such oil developments have occurred against the background of two major oil price increases, in 1973/74 and 1979/80, which have also had major implications not only for the UK but also for its trading partners. The accelerated decline of the traditional manufacturing industries, and the associated rise in unemployment, to many observers, is at least partly a result of the emergence of the UK as a major oil producer. The theoretical justification for such a viewpoint is identified. This paper is predominantly concerned with outlining the importance of oil and gas production to the UK economy. It also discusses the major theoretical models that have been developed to analyse both the short run and long run impact of oil on that economy. A quantitative assessment is made of the impact of oil on the UK economy, and of the role of the Government arising from such a discovery.