England V Norway: A Tale of Two Oil Discoveries?

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1:33To understand the economy, you have to understand human nature. This podcast is powered by Acast. England, the champion's name, Lord Nelson, Lord Beaverbrook, Sir Winston Churchill, Sir Anthony Eden, Clement Attlee, Henry Cooper, Lady Diana. We have slotted them all together. We have slotted them all together. Maggie Thatcher, can you hear me? Maggie Thatcher, your boys took a hell of a beating. Your boys took a hell of a beating While Maggie Thatcher

2:15David McWilliams: Now John, that was the famous The infamous 1981 Norway beat England 2-1 Bjorge Lilleham Who was the commentator of Norwegian Broadcasting Company Your boys took a hell of a beating Lord Beaverbrook Lord Beaverbrook Clement Attlee Maggie Thatcher Are you listening to me? That is so good I completely forgotten about that. 1981, was it? I think 81 or 82, long, long time ago. Norway beat England for the first time ever, 2-1. And of course, that's what happens when small countries beat big countries. A whole host of emotion comes out. It was a fantastic, fantastic quote. And what I want to do this podcast, I want to talk about England versus Norway, but not from the context of football.

3:10David McWilliams: We let somebody else who's got more panache, more guile, as Dumfy used to say, than myself to discuss that. But what we will discuss is the tale of two oil finds. It is a fascinating tale, the contrast between Norway and the United Kingdom, a.k.a. England in this case, because most of the money flowed into England from the North Sea oil discoveries. And this is an extraordinary story of economics, of finance, of culture, of management, economic management, and of course, of equality. Who gets to spend the windfall of a country like Norway or Britain when they find oil? Who gets to spend it? And also, how do they spend it?

4:03And how do they spend it? I'll just give you.

4:06David McWilliams: So in 1965, a year before the first oil fields were even suggested in the North Sea, British GDP per head in dollar terms was 15 ,500. Norwegian GDP per head was 13 ,800. Okay, so the British GDP per head, not substantially, but significantly above Norway's. Today, British GDP per head is about$52 ,000. Norwegian GDP per head is$91 ,000. So in this period, the Norwegians have managed to expand their GDP dramatically. The British have expanded, but not half as much. And the question is, what happened, right? What happened when both these countries found oil? Both these countries then decided, let's prospect for oil.

4:59David McWilliams: This will have a transformative impact on our societies, on our countries, on our people, on our opportunity. and we end up in a crazy situation where the Norwegians have, as a result of the way they manage their oil find, the largest sovereign wealth fund in the world. It's equivalent to$2 trillion. Wow. United Kingdom has none, has no wealth fund. So per capita wealth from the UK oil find is zero, whereas per capita wealth from the Norwegian oil find is$364 ,000 per citizen. Right? Per citizen. Incredible. So they can all retire. They can all retire. They just go skiing and fishing. They have covered their pensions for the next 380 years.

5:51For every Norwegian who will ever live, who's ever going to be born for the next 380 years will be covered by the Sovereign Wealth Fund, which stems directly from the revenues

6:03David McWilliams: that the Norwegians found at the same time as the British. It is an extraordinary story of mismanagement in the UK and extreme, almost perfect management in Norway. The question is, what happened? Why did it happen? How did it end up like this? What's the long-term implication? What does it tell you about the culture of the country? What does it tell you about the economy of the country? What does it tell you about the deep yearning for equality in one country and the lack of any real yearning for equality in another country? It also tells you about Norway of the 1980s and Britain of the 1980s.

6:45So when your man said, Maggie Thatcher, can you hear me? Your voice took a beating.

6:49David McWilliams: It was exactly this period when Britain and Norway start to see real, real revenue come in from their oil finds. So that, John, is what we are going to talk about today. It's the tale of two oil finds. It's against the background of one of the most hyped football matches, which is on Saturday night, between Norway and England. For most people's money, England should win, but Norway have the resilience and they have a couple of secret weapons. Of course, your man Haaland being not the most secret, but the most predatory centre forward that we have seen for a long, long time. So I know we don't want to get into football too much, but where would you put your sovereign wealth fund?

7:33On England or Norway on Saturday night? Look, I think that both teams have proven themselves to be amazingly good at taking their chances. But I'll go for the Norwegians. Right. We'll come back to this one. And of course, you're going for the Ingerland. As you know, I have a very soft spot for Norway. I took a trip up there a couple of years ago and actually fell in love with the place. apart from the price of a pint, everything up there is absolutely gorgeous. I think it's one of the most beautiful countries in the world. So that's what we're going to talk about. We're going to talk about this beautiful country.

8:14I want to start really early, right? With, you know, Norway being one of the poorest countries in Europe at the beginning of the 20th century.

8:24David McWilliams: The UK being the strongest country in the world at the beginning of the 20th century. The United Kingdom, of course, although it was being overtaken in nominal terms, it's still controlled. Think about this. Britain still controlled in the 1920s 50 % of the world's known oil reserves. That was mainly due to the controlling stake they had in a company called Anglo-Persian, which became BP, which was basically the oil of Iran. If you're interested in that story, go back to our previous podcasts on the CIA coup against Mossadegh in Persia, in Iran. We did that a couple of months ago. But basically, the UK had a lot of money in the oil sector.

9:08David McWilliams: They had a lot of technological ability. They had a huge and deep capital markets. and ultimately when they found oil in the 1960s and into the 1970s there was a real sense that this is going to be an absolute game changer for the uk norway john on the other hand had a pretty rough 20th century okay up until the 1970s why why was that so first of all norway was a colony of Sweden. Right. And it only gained its independence in 1905. Now, between 1836 and 1930, so in that 100 years, 860 ,000 Norwegians emigrated. Only Ireland had a higher emigration in Europe per head of population than Norway. And that's why if you watch the American movie Fargo, they're all Norwegians and they have that slightly Norwegian accent.

10:02And those people went to the Midwest and they became farmers. Similar to Ireland, they were unable to industrialize, right? Because A, they were a colony and Sweden was extracting resources. And then when the Swedes left, all the Norwegians really had was fishing, farming and timber. Sorry to interrupt, but how did their independence come about? It wasn't a violent uprising and insurrection, was it? For an Irish listener, it's much more likely to think of it in the context of home rule. So what would have been before the 1916 rebellion here, Home Rule was the logical way. So basically it was going to be a peaceful dissolution of a political union with the UK beginning with Home Rule.

10:45And that was going to be much more likely the way in which Ireland got independent from Britain. And it was the way in which Norway got independence from Sweden. So basically the Norwegians decided that they wanted separate diplomatic and consular service to represent Norway. The Norwegian parliament, which was sitting in Oslo, even though they're the political union, a little bit like our parliament before the Act of Union in 1801. It was more like a local government type of thing. Exactly, exactly. And they said, look, what we're going to do is we're going to put it to a vote, a plebiscite, a referendum.

11:21And the overwhelming majority of Norwegians voted for separation from Sweden. And the Swedes formally recognized Norway's independence on the 26th of November 1905. But John, that's all very well, but they didn't have anything to sell, right? Yeah. So they remained neutral in the First World War, which kind of makes complete sense. Their two biggest trading partners, the UK and Sweden, were hit very hard in the 1920s and into the 1930s. So the Norwegians had a very, very rough time economically, right? Then they get invaded by the Nazis because the Nazis wanted the Norwegian coast to, in effect, surround Britain by having Nazi ships in the North Atlantic.

12:08And so the North Atlantic became crucial for the prosecution of the war in the North Atlantic. The merchant navies, the navies, etc. Once the Nazis were kicked out of Norway, the Norwegians got a lot of martial aid. And then they start to grow. Okay, the economy started to grow. They joined the GAS, they've joined the World Bank, they joined NATO, they were big, big NATO members. They joined the United Nations, and they've been very, very active United Nations members. And they joined something called the European Free Trade Area, John. Well, I was going to ask you there, like, so they joined all these things and the European Free Trade Area.

12:44Why didn't they join the EU as a full member? That's a really interesting question. And I remember studying years ago in that place, the College of Europe,

12:53David McWilliams: and there was a lot of Norwegian students. And they all seemed to suggest to me that there's two things going on. One is that their model of economic, their kind of Nordic model of the economy was very much predicated on the view that Sweden and Finland would remain out of the European Union, which they did until the 1990s. and their idea was that we would have a European free trade association but no further they wanted to remain independent I think largely also because of the oil find because they said well hold on a second you know if we dilute our sovereignty too much will this oil money go somewhere else will somebody else say well this is part of our oil money they might have looked at the way in which a country like Ireland for example was treated in fisheries so in fisheries what you know is that small countries with large Atlantic territorial waters become very valuable in a fishery negotiation.

13:53What happened in the context of Ireland is because there were far more farmers than fishermen in Ireland, our entire policy was biased towards the CAP and farming, and farming did very, very well out of EU membership. And the Norwegians probably looked at it and said, well, hold on a second. We have a lot of fishermen too. We have a very deep fisher culture. if our waters are going to get plundered by Spanish trawlers, British trawlers, you know what? We don't want to join that. And I also think psychologically, having been left alone to fend for themselves, in effect, in the early 1940s against the Nazis, probably changed their view about the nature of treaties and the reliability of other people.

14:38So that kind of self-sufficiency, fueled by the oil boom, fueled by their history, and fueled by their primary of their fishing fleet, all probably became for them an overwhelming argument. And they kind of probably also thought, look, we're in NATO, we're in the UN, we're in the World Bank. Yeah, we're doing enough. We're doing enough. We've got a free trade with the Europeans. So they pay every year a little bit to the EU in order for them to have free trade with the EU without being a member of the EU. A bit like Switzerland. Both these countries pay the EU for open trade. And they probably thought, you know what, that trade-off is better for us than having like the Maastricht Agreement and probably open immigration policies, which they probably didn't want.

15:22And all those sort of things that sovereigntists argue are diluted by being a member of the EU. It's interesting you mentioned their possible lack of trust of the other EU states, given that what I learned when I was there is that trust is such a fundamental part of Norwegian culture. And it was explained to me the reason why it's so strong there is because it's such a difficult environment. The topography is so harsh, very mountainous and all that kind of stuff is that in order to survive, you have to, and they had to, rely on each other and therefore trust each other. And I wouldn't want to put too fine a point in it, John, But, you know, there's also, it's a very Lutheran country.

16:11David McWilliams: It's a very homogenous country. It's Lutheran. It used to be quite God-fearing up until recently. I think those sense of local communities against the odds up there in the fjords, in the shitty North Atlantic weather, all those things combine to change the very essence of the nation. And I think if you get occupied by the Nazis, you realize, hold on a second, we are vulnerable whether or not we have treaties with other countries. who are going to protect us. Because, of course, Sweden remained neutral in the Second World War. And this must have shocked the Norwegians, because their traditional both enemy but also ally didn't come in to help them.

16:52David McWilliams: So I think that all those psychological reasons must inform that Norwegian sense of sovereignty, of independence, of ruggedness, of cussedness, you know, all this sort of Viking stuff that even the footballers are talking about. Yeah. Because we know that most Irish people who are Vikings, who trace their lineage back to the Vikings, come from the part of Scandinavia that is southern Norway. That's where they came from. That's where the Vikings came to have a go at us. Whereas the Swedish Vikings were much more likely to settle the Baltics and go east. Whereas the Norwegian Vikings were much more likely to settle us.

17:32David McWilliams: So anyway, there we are. We have this extraordinarily interesting place left up there its own for a while and then suddenly the world changes holland finds gas in groningen in the 1950s and 60s this triggers similar interest in britain and in norway to think you know what maybe we could find gas in the north sea not only do they find gas but they find lots and lots of oil both countries and the way in which the north sea is divided it's just like a straight line down the middle. So on the right-hand side, as you look, was Norwegian. On the left-hand side was British. British oil wasn't produced in the North Sea.

18:12David McWilliams: The BP found a very, very big oil field called the Forties Field in 1970. And by the mid-1970s, they were beginning to drill. Britain wanted to be self-sufficient. This seemed to be possible. And again, if you think of what was happening in Britain at the time, Britain had gone through the austerity of the 1970s, the sort of Jim Callaghan three-day week, all those sort of things. So the North Sea oil was seen in the UK as basically the golden ticket out of a sort of an economic malaise that afflicted Britain in the 1970s. So British oil wasn't produced until 1975, but by the early 1980s, and this is when Mr.

18:53David McWilliams: Thatcher is in power, the UK was a net exporter of oil and gas, and it remained so until the mid-1990s. production of Britain peaked around 2000, right? The Norwegians find exactly the same type of oil fields. First they find gas and they find oil. They decide to drill even deeper. They find a massive, massive oil field called ecofisk. You might even remember from the 1970s and 1980s. And they started to drill. They were both countries were also helped enormous in the 70s between the fact that the price of oil went from$2.96 a barrel to$37 in the 1970s. Wow, that's a hell of a jump, isn't it? Yeah, so just as these countries found oil, price of oil goes through the roof, and everyone's like, happy days, right?

19:45Yeah.

19:46David McWilliams: And then you see the difference. Then you see the difference between the Nordic model and the British Thatcherite model. So Mrs. Thatcher gets into power in 1979, and the governing philosophy was privatize everything. Yes, I remember that so well. So the first company was a company called Brit Oil, which was set up by the British government, the Labour government, to own the assets of the oil fields for the British people. Brit Oil was privatized. BP, British Petroleum, which had been part owned by the state, was also sold off in the early 1980s, right? So the UK government had no direct ownership stake in any oil or gas country, unlike the Norwegians.

20:27David McWilliams: We'll talk about that in a sec. Can I just ask you, was that a massive windfall for selling off the likes of BP? And who benefited most from that? Exactly. Sold off the likes of BP. Now, this is the crazy. So the privatization receipts in the UK totaled£67 billion, came in to the British Exchequer. So then once you get this massive windfall, you have a choice. what do we do with it? Do we spend it straight away or do we save it? The British under Mrs. Thatcher spent it all on tax cuts. The top rate of income tax fell from 60 % to 40%. Corporation tax was cut from 52 % to 33%. And the British, in effect, wasted their massive oil bonanza on tax cuts.

21:20David McWilliams: In effect, they traded oil for BMWs because basically they had tax cuts for British workers. British workers bought posh German cars. I also think that you wouldn't have had the miner's strike and you wouldn't have had that enemy within and the conservatives turning on the miners in the early 80s had it not been for the oil find. Because once they found oil, well, Mrs. Thatcher said, well, we don't need these dirty mines, and we certainly don't need these labor-supporting trade unions, so why don't we go after them? So the oil find in Britain did a number of things. One, most of it was given away in tax cuts.

21:59David McWilliams: So by the early 1990s, it was all gone. All the money was gone. Short-term thinking. Yeah, and of course, engineering the economy in order to win elections so that Mrs. Thatcher could have a booming economy by the time the next election came around. That's the second thing. The third thing, it probably gave her cover to orchestrate her campaign against what she called the enemy within the left-wing trade unions, the miners, all those things. But fourthly, the tax bonanza allowed her to pay the unemployment welfare of of now 4 million British people who are unemployed. So for a whole variety of reasons, I think that the oil find absolutely changed the UK in the 1980s to a profound degree.

22:50David McWilliams: Even in terms of internal politics, the oil find was the first big bit of news for Scottish independence. And Scottish independence was back on the table in the 1970s and late 1970s because, of course, the Scottish said, well, the oil is ours. It's not English. Yeah, yeah, yeah. You know, it's in Scotland, it's in Scottish territorial waters. But what you see is an extraordinary squandering of the oil bonanza. And it's probably fair to say that it was used to cushion the blow of deindustrialization. So when the United Kingdom said, well, you know, we don't need a car industry, we don't need a steel industry, we don't need a shipbuilding industry, we certainly don't need a coal industry, all the costs of those were probably cushioned by the fact that they had this oil money coming from the North Sea.

23:38David McWilliams: This had created a new town in Aberdeen, although Aberdeen was always an old town. It was a small fishing village, in effect, a fishing town. It became the sort of the Dallas of the North Atlantic. And of course, the stories are legend. Okay, so in effect, what the British did was they said, we're having an oil find. Let's have a Jamie Vardy party. Okay, so if you're watching a Jamie Vardy party, John, that was it. the Norwegians on the other hand. I didn't know. Hang on a second. I didn't realise Jamie Vardy was known for his parties. Oh, that's one of the great tunes. That's one of the great tunes.

24:15David McWilliams: We're all going to a Jamie Vardy party. It's a classic. It's a classic. So basically, the Brits went on the equivalent of going on a session with the oil money. Yeah, yeah. But you just said that they had four million unemployed. So why didn't they just sort that out straight away? Well, because the rise in unemployment in the 1980s in England. So I bring you back to Ghost Town by the Specials, right? Ghost Town by the Specials was written about Coventry. And what it's basically written, it's these guys from Coventry lamenting the fact that all the car industries around Coventry, which had given the average working guy a job, had closed down.

24:57David McWilliams: And therefore the bars had closed down and the clubs had closed down and the town was becoming like a ghost town. Too much fighting on the dance floor. Exactly. Exactly, right? So had it not been for the oil revenues, the Thatcher government couldn't have paid the welfare for the 4 million people who are now unemployed. Do you remember I Am a One in Ten, songs by UB40, all that period, right? So what the oil revenues enabled Mrs. Thatcher to do was to fight that internal war against what she saw as old industries. And she envisaged a Britain with oil revenues coming in, tax cuts, generating the platform for the service industry in the South.

25:43David McWilliams: That service industry in the South would give the Tories a constant electoral majority because London would be, in effect, a boom town. And because the North of England always voted Labour, she was quite happy for that to be the case, right? That's a cynical way of looking at. Another way of looking at it is that she had a totally different model. She thought that she could liberate British industry from what she called the dead hands of the government and the interference of the unions, all of which is up for debate. All I'm saying is that the oil money enabled that for her and emboldened her because it was cash.

26:22David McWilliams: It was in effect free cash. So that's what the British did. That's the British example. What happened in Norway? The Norwegians published a paper called The Ten Commandments of Oil Policy in 1971. And this made it mandatory to retain national control over the oil revenue, to create a domestic oil industry, to make sure that the onshore landing of petroleum was all controlled by a state oil company. And this has become known as the Norwegian model. So they set up a company called Statoil. So Irish listeners might remember Statoil came over to Ireland and I think bought Maxol about 20 years ago.

26:57David McWilliams: This has been changed now to a company called Equinor. Equinor means Norwegian equity or Norwegian equality, depending on which way you look at it. But it is now the state oil company. Of course, what this did was channeled all the oil money of the Norwegians into a state company. Now, most countries would have done the following. If the state company grows really rich and has got loads of money, we'll spend it on buying the next election. if they had. But the Norwegians said, no, what we're going to do is we've looked at this problem with Dutch disease in Holland, where they started spending the money and it started destroying the other industries like the fishing and the timber and all those industries.

27:42David McWilliams: So the Norwegians said, you know what? No, we are not going to spend any of this money. So we are going to manage the economy. So if the game management of the British was throw everything at the big lad up front and let's get a few goals. The game management of the Norwegians was, look, let's play it out safely from the back. Let's knock it around and let's see where we're going. So their rule - And then bang it up to Holland. Exactly, exactly. And eventually bang it up to Holland, right? But their rule is that only 4 % of all the fund's assets can be spent in any one year in Norway, leaving the capital itself untouched.

28:23David McWilliams: So what they're trying to do is they're trying to build the capital, right? and they're putting it into this long-term investment fund. And more interestingly, the long-term investment fund can only be invested outside of Norway. So what they're doing is they're making sure that they don't overheat the economy internally. So what they're saying is, if we overheat the economy internally by giving this away at tax cuts, by trying to win elections, A, the money will disappear and it'll actually basically go through the economy like a dose of salt because Norway is a small open economy. They don't make much stuff up there.

28:58David McWilliams: And so if you give everyone a tax break, they're going to buy German cars and Japanese technology and la la la la la, right? So the Norwegians said, no, what we're going to do is we are going to put everything aside for a long-term policy that leaves the economy unimpinged and less unbalanced as a result of the oil find, but gives us this huge windfall into perpetuity that we're going to invest around the world and ultimately we are going to make every Norwegian far, far richer. So that policy was taken in the 1980s. They set up the fund in the 1990s. What happened in the 1990s for both Britain and Norway was that lots of other oil fields came into production all around the world.

29:52David McWilliams: The price of oil fell. And obviously, if you think about the North Sea, it's very expensive to get the stuff out of the ground. Because you've got very, very deep wells in, you know, possibly one of the most dramatic seas in the world, the North Sea. So it is incredibly expensive to drill and to effectively get the oil out. But because the Norwegians had Statoil and it was a state company, their oil production companies didn't need to make as much profit. Whereas the British were using private oil companies. And of course, those private oil companies were deflected by two things. One was their shareholders required them to make lots of profit, number one.

30:35David McWilliams: and as the cost of drilling in the North Sea rose and the price of oil elsewhere fell, it became unproductive and expensive to produce in the North Sea. So British oil production peaked in 2000 and has been tapering off since. That's the first thing. The second thing is because the large oil majors were also involved in the oil finds in Nigeria, in Venezuela, etc., their management was deflected. Whereas the Norwegians weren't involved in that, and they just kept focusing and focusing on how to make Norway as competitive as possible. So the upshot is, and this is the amazing thing, John, the upshot is that the Norwegian pension fund is now 21.3 billion krona or 2 trillion US dollars.

31:29David McWilliams: That's roughly$364 ,000, John, for every Norwegian, which is 5 million registered citizens, right? Every year, the net cash flow to the state is 70 billion. So the 70 billion that's flowing into the Norwegian coffers, how much of that is directly from oil and how much of that is a return on... That's all directly from oil. But how much then is coming in as a return on the investment of the sovereign wealth? So the net cash flow to the state is 70 billion. And these estimates have probably increased now because of the Iran war, because the price of oil will go up. So of that, they are putting aside 96 % of that 70 billion every year.

32:19Right.

32:20David McWilliams: And this then allows them to be in a mad position where Norway owns 1.5 % of the value of every single listed company on earth. Wow. On earth. They have stakes. Talk about hating your bets. Yeah. But they have stakes in 7 ,200 companies, right? It's now this country of 5 million people has a fund larger than Saudi Arabia's entire GDP. It's mad. And the fund last year made 13 % return, which is pretty good going. Right. Yeah, yeah. So another fascinating thing is that the fund is not allowed invest internally. Yes. And again, this is because of corruption. The last thing they wanted to have is a whole bucket of money coming in to Norwegian politicians, civil servants, et cetera.

33:12David McWilliams: And their mates in Norwegian companies saying, invest in me, invest in me, et cetera. So what they're breaking the link between the money coming in and the domestic state. And what that does is it reinforces the idea that this money won't be used locally by local corrupt bigwigs, which is amazing when you think of that. Where do they get this mentality and this kind of foresight? I mean, it's kind of unique. It's not really the norm. So where did they kind of get this idea from that? OK, we're going to stamp this out from the outset. I think they looked at all the evidence of what is called the curse of resources all around the world.

33:51David McWilliams: And the curse of resources is this weird thing is that you think that when you find resources, it makes the country very rich. Yeah, yeah. But in most cases, it makes the country very corrupt. And the reason is the following. All the local bigwigs and the billionaires locally tried to get their hands on all the resources of this oil find in this case, right? And if they can't get their hands on the resource of the oil file, they try to get their hand on the state that is giving out the money. It's called state capture. So the Norwegians probably looked around the world and said... Like Russia and Venezuela.

34:28David McWilliams: Russia and Venezuela and Nigeria and all these places, right? Yeah, yeah. And Dubai and Abu Dhabi and all these places where they're basically, the sheikhs get all their hands on the money and then buy the World Cup with the money. Yes, yeah. You know, so what the Norwegian said is, we are no pure. This is the interesting thing. They said, we are no more moral than any other people. So the same thing could happen to us. So we're going to institute a law that says it can't happen because we know that over time, the incentive will be just far too much for local people. And so what they've done is something really extraordinary.

35:08David McWilliams: they've managed to use their oil find for the good of the Norwegian people, of all the people. What happened in Britain is they used the oil find for the good of the owners of the privatized oil companies and for those who got those big Thatcher Lawson tax cuts in the 80s. So basically it's the Harry Enfield-ization of the tax windfall, right? Because he's got loads of money. So that's what basically happened. And then in the 90s, as it became increasingly expensive to produce oil in the North Sea relative to other places, which were cheaper, British production started to fall. Norwegian production remained more or less the same because the Norwegians didn't have to genuflect to the profit motive.

35:58David McWilliams: And so now we find ourselves, John, today in a situation where the two countries have a completely different experience. OK, Max, like a couple of weeks ago when Starmer was in the shit and dare I mention his name, but Trump started interfering as always and telling Starmer to drill, baby, drill and open up the North Sea oil fields and all that kind of stuff. And then now, of course, reform have now taken up that mantle. But the question is, like, why don't they? Because there's still oil there. But before you answer that, let's do a bit of this.

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38:46So Mike, there still is a fair bit of oil and gas in the North Sea. and as I was mentioning, Trump and now reform are crying out to restart the drilling. Drill, baby, drill.

39:01David McWilliams: Why don't they? Yeah, there's loads. There's about 10 % of the reserves still in the British part of the North Sea. It's ideological and it is now a fascinating political flashpoint, John, between reform and the Labour Party. So reform, by the way, just on reform, Nigel Farage, as we know, just resigned. Now, he just resigned over having a hissy fit, over people investigating whether or not he took a gift from a fellow, a crypto trader in Thailand of five million quid, and whether he reported that or registered that as a gift, as you have to do as a member of parliament. Would the man who didn't register a gift be the man to trust not to give his mates all the windfall from drilling, re-drilling in the port sea?

39:55What do you think? Oh, man. He's becoming more and more a Trump puppet and modelling himself and his policies on the American administration.

40:05David McWilliams: Okay, but be that it's me, Richard Tice, who is the Reform's energy spokesperson, said the party would extract every last barrel, every last drop. That's the quote of British oil and gas if it won the next election. Farage has said the Tories killed the North Sea, right? And he said the country should produce its own oil and gas. Now, this is all part of the we stand alone, we fight them on the beaches, spitfires, yadda yadda yadda, right? Britain alone, this is like Brexit. The North Sea oil is the radiator for Brexit, okay? Basically, this is going to power this independence. They're still looking in the rear view mirror.

40:44Yeah, it's all part of the same thing. It's like, we should be independent.

40:47David McWilliams: Don't trust Johnny Farner. Why do we take Johnny Farner's oil when we have oil, right? But interestingly, this is a complete campaign, and this is quite interesting, right? The Sun and the Daily Telegraph, two newspapers that support populists and Farage, etc., etc. There have been 63 pro-North Sea editorials in both of those papers in the first six months of this year. So that is clearly an orchestrated campaign on the part of the media and of the part of reform and of the part of the more Brexity end of the populist right in Britain to make North Sea oil a campaigning political idea. Now, is there any argument there?

41:36David McWilliams: I suppose there is. Look, first of all, Britain wants energy security. Yeah, well, that's a good argument in itself, to be honest. Yeah, you know, should they be dependent on the Middle East with the US-Israeli invasions of various parts of the Middle East? And Russia. Yeah, what's the lesson from Russia? So that's the first thing. Yeah, fine enough, right? A lot of the rhetoric, though, seems to be based on the notion that if Britain begins to drill again, that the price of oil will fall to the British consumer. Now, that would mean that Britain would have to sell its oil domestically at a lower price than it sells its oil abroad.

42:16David McWilliams: I'm not too sure, given arbitrage, how it could actually do that. But it may well figure out an oil and gas discount for local British people. There's also an argument to say that Britain has allowed its nuclear power to run down over the last while. And as it tries to become energy more self-sufficient, a boosted nuclear power capacity together with North Sea oil could actually not so much do the trick, but could change the game a little bit. But when you look at the amount of oil that is in the North Sea, even though it still is a significant amount, it is estimated that in the next 20 years, even if British North Sea was to be operating as full capacity, would probably satisfy 1 % of European oil demand.

43:06Right.

43:07David McWilliams: Is that all? Yes. Think about it. Norway only produces 1.5 % of the world's oil demand. So these are not huge players. But I'll end with whether or not Britain drilling now would change the model that we've spoken of for the last half an hour, which is that the gains from North Sea oil would go to the British people, as is the case of Norway, or would the gains go to a small coterie of insiders, as has always been the case in the UK. My sense is that the Norwegians have managed to wean themselves off their oil dependency by deflecting so much of that oil money into their sovereign wealth fund that they are much more now going to be determined by the global economy rather than by the oil market, because they've managed to lay off the risk onto the rest of the world, and very effectively.

44:01David McWilliams: My sense, even what you're seeing with Farage today, he's basically saying, I did nothing wrong, and I'm going to go back. It's a bit like the old school Irish independent TD approach. When I go back to my people and my people tell me I've done nothing wrong, then I've done nothing wrong. And I think that that's kind of hyper-localism. And I'm not too sure if a hyper-localist politician is the man you want to control of the last 10 % of the North Sea's oil reserves, which we know have been blown in such spectacular fashion already in the UK. So we leave it there, John. We'll watch the game and we'll be back to you Tuesday.

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