Our constitution, July 2012: Oil reserve

“Oil reserve / Long Term Investment fund”

We live in an oil-dependent world, and have got to this level of dependency in a very short space of time, using vast reserves of oil in the process – without planning for when the supply is not so plentiful. The Transition Handbook

Most of us, most of the time, don’t think about how dependent we are on oil, a finite and diminishing resource, because it is too bloody scary to contemplate. If you want to read some overviews of how societies collapse when the resource they depend on runs out, Jared Diamond’s Collapse: How Societies Choose to Fail Or Succeed is a good place to start.

Extracting oil from under the North Sea will get more and more difficult but more and more desirable:

Those who say the oil is running out overstate rather than fabricate: more than half the local reserves have already been extracted and what’s left will be harder and more expensive to pump out. In a manifesto festooned with pictures of windmills looming out of the water, the SNP laid out a plan to succeed North Sea oil with a giant renewable-energy industry.

Switching from oil to renewable energy is an immensely sensible plan (too sensible for partisan attack). But Scotland has oil. And mention of oil in the Scottish Constitution is likely to cause problems wider than simply “thanks very much, we’ll take our share of the NHS and the BBC and be off now”.

The Scotland/England maritime boundaries have a known problem: they were imposed, not negotiated, without regard for the modified equidistance principle, in order (in the judgement of Craig Murray, Alternate Head of the UK Delegation to the UN Convention on the Law of the Sea) to annex 6,000 square miles of Scottish waters to England – which includes the Argyll field and six other major oilfields. This would (see Government Expenditure and Revenue Scotland 2008-2009) make a significant difference to Scotland’s economy. (One reason for the strange resurgence in devo-plus/devo-max may be that no matter what new powers were granted to the Scottish Parliament, control over the oil revenues wouldn’t be among them. English opponents of independence can be quite shameless in their efforts to convince that the North Sea Oil isn’t really Scotland’s.)

The tradition that mineral wealth – oil or metal – belongs not to any private owner or corporation, but to the country itself, is over 2500 years old:

But we cannot refuse our admiration to the fervent and generous order of public spirit existent at that time, when we find that it was a popular leader who proposed to, and carried through, a popular assembly the motion, that went to empoverish the men who supported his party and adjudged his proposition. Privileged and sectarian bodies never willingly consent to a surrender of pecuniary benefits for a mere public end. But among the vices of a popular assembly, it possesses the redeeming virtue to be generous. Upon a grand and unconscious principle of selfishness, a democracy rarely grudges a sacrifice endured for the service of the state.

The money thus obtained was devoted to the augmentation of the maritime force to two hundred triremes—an achievement that probably exhausted the mine revenue for some years; and the custom once broken, the produce of Laurion does not seem again to have been wasted upon individuals. To maintain and increase the new navy, a decree was passed, either at that time 37, or somewhat later, which ordained twenty triremes to be built yearly. (Athens: its rise and fall – Vol 2, by Edward Bulwer Lytton, 1837)

In 1976 the state of Alaska set up the Alaska Permanent Fund, a Sovereign wealth fund which benefits from 25% of the mineral revenues per year. This fund has made Alaska the most financially-stable state in the US – and among the most prosperous in the world.

The Catch-22 for the oil industry is that these huge and powerful corporations are absolutely dependent on being able to continue to extract and sell the fossilised carbon wealth of 145 to 65 million years ago. The individuals who run them know, not being fools, that the oil won’t last forever. The corporations themselves can’t “know” anything of the sort: their obligation is to maximise profits for their shareholders in the present day, not to think about what will inevitably happen when there is no more oil to be extracted.

The Catch-22 for an oil-rich country is that any plan that will threaten the oil industry will be met with real opposition. (Hugo Chavez is the President the US (and the Bush family) love to hate, not because he’s especially vile, but because Venezuela has more oil reserves than Saudi Arabia and Hugo Chavez has been nationalising the oil industry to ensure that the primary beneficiary of the oil under Venezuela is the Venezuelan state.)

If we decide to firmly state in the Scottish Constitution that the oil and mineral reserves of Scotland are the property of Scotland’s people, to be used to our benefit and under the control of our government, this Constitutional annexation will be derided as unrealistic, provocative, socialist, aggressive, and doubtless other adjectives I haven’t thought of.

But even so: we must do it.

Update, 18th July:

When I posted this yesterday, Ross Croall promptly pointed out a blogpost he’d written in May (read in full) which outlines in detail the dilemma for “the pro-independence ‘green’ camp”. In much-condensed form: the economic case for independence is very majorly-based on Scotland’s oil; and despite Scotland’s love-in with renewables (For example: Marine Conference & exhibition, 18th/19th September, Inverness), we are as yet nowhere near being able to give up oil.

Ross Croall notes:

The global detrimental impact on the environment resulting from years of carbon emissions is not measured in any orthodox economic way. The world has an unquenchable thirst for burning fossil fuels, and Scotland – amongst many other nations – is helping to fuel the supply. In return, we are benefiting very heavily financially, but at the price of borrowing from the future. We are borrowing from something that cannot be measured quantitatively, and so by extension, is usually ignored or devalued when it comes to formulating policy. This has led to a situation where the ecological imperative of renewable energy has been diminished.

Ray Kurzweil says of solar energy:

Today, solar is still more expensive than fossil fuels, and in most situations it still needs subsidies or special circumstances, but the costs are coming down rapidly — we are only a few years away from parity. And then it’s going to keep coming down, and people will be gravitating towards solar, even if they don’t care at all about the environment, because of the economics.

So right now it’s at half a percent of the world’s energy. People tend to dismiss technologies when they are half a percent of the solution. But doubling every two years means it’s only eight more doublings before it meets a hundred percent of the world’s energy needs. So that’s 16 years. We will increase our use of electricity during that period, so add another couple of doublings: In 20 years we’ll be meeting all of our energy needs with solar, based on this trend which has already been under way for 20 years.

Solar energy isn’t a particularly appealling package to sell in Scotland: while heavy rain (or even snow) isn’t necessarily a dealbreaker for good solar panels, the long winter nights are. But what’s true for solar panels can be true for other forms of renewable energy – if there’s a long-term vision and investment in technology that can’t be frustrated by oil companies who do not want us to move away from dependency on oil.

That’s why the Scottish Constitution has to say that the oil is ours. Not to shut down the oil industry in Scotland in any precipitate manner – but to ensure that the focus is not on burning oil for cash but looking at the benefit of Scotland as a whole, and long-term – not over the span of a Parliament or two, but over the next fifty to a hundred years.

That is the kind of thinking that’s going to be derided as “unrealistic” and “mindless tree-huggery” and dismissed by frightened angry shareholders as communist nonsense. This is the one part of a Constitution for Scotland that I foresee very wealthy powers with considerable economic clout in Scotland wanting off the table, by fair means or by foul. But it can’t go.

We’ve just had the wettest May, June, and July on record. In the winters of 2009 and 2010 we had heavy prolonged snowfalls even in parts of the UK that normally don’t see much snow. It may seem counterintuitive, but this is global warming:

The vapor pressure of water is one of the most important factors in determining weather. Water will evaporate from the surface until the air above it reaches its saturated vapor pressure. The saturated vapor pressure depends only on the temperature, which makes temperature the determining factor controlling the amount of moisture that the air can hold. If a mass of air saturated with moisture moves to higher altitudes or encounters a cold front and is cooled, the air becomes supersaturated, which leads to precipitation. Over the last century, the Earth’s average temperature has increased by about 0.8°C, which translates into an increase in the saturated vapor pressure of water of about 7%. When precipitation occurs, on the average, 7% more moisture is available. It is a reasonable conclusion that when it rains, it will rain more and when it snows, it will snow more.

There is no serious scientific disagreement that the world is consistently getting warmer, nor that one cause for global warming is the increase in greenhouse gases: in any case, reduction in greenhouse gases is the only part of the global warming model that we as a species have any control over.

A thoughtprovoking world map which lets you focus in on any area you’re interested in and see how it would be affected by a 7m rise in sealevel – (inevitable if the world gets warm enough for a large part of the Arctic ice to melt). We’re not the Maldives: most of Scotland will stay above water. But if you think the weather’s been terrible recently, it will only get worse.

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Filed under Economics, Elections, Oil, Scottish Constitution, Scottish Culture, Scottish Politics, Sustainable Politics

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