© Shutterstock Feed In what is possibly one of the largest acts of self-harm in history, President Trump has launched a devastating trade war on the world (but notably left out some upstanding countries such as Russia and Belarus – go figure).
The post-Second World War age of economic prosperity (and general peace), which the US knowingly and willingly led, is now at risk on the basis of what appears to be flawed economics. Many thought President Reagan’s ‘Voodoo Economics’ were bad. I wonder what this current approach will come to be termed?
Mind you, no one should be surprised. President Trump told us what he was going to do before he was elected, and 77 million Americans willingly put him in charge.
© Supplied by Aodhan Consultancy LBe in no doubt how much this will impact all of us. And whilst some are proclaiming a ‘Brexit Dividend’ because the UK has only been hit with a 10% tariff as opposed to the 20% EU hit, I wouldn’t be too smug.
UK vehicle manufacturers still face 25% tariffs (and note that Jaguar LandRover have paused shipments to the US), as does steel. It is thin gruel to call this a benefit when the impact is still going to be significant.
Maybe the Government’s ongoing efforts to get a trade deal with the US will bear fruit. But there is always a risk that the US will walk away if we stick to our guns on food standards (hormone-filled beef and pork anyone? – em no thanks) or if the President just decides to take the huff with us for some unspecified reason. He is notoriously sensitive.
Oil and gas silver lining
There is, however, maybe, just maybe one potential area which could prove to be a silver lining – if the UK and Scottish Governments can see it and act on it. That is oil and gas.
President Trump famously spoke about the need to “drill baby drill”. He has bemoaned the “windmills” which spoil the landscape (including incidentally at his golf course in Aberdeenshire) and has removed environmental protections in the US. Thereby making it easier to drill.
So maybe this is one area which we could use to charm the president – if we show ourselves to be like-minded in oil and gas and potentially woo US companies to spend a little bit of extra effort in the North Sea.
By way of example, let’s look at Guyana – which is home to Exxon’s largest find of a generation – some 11bn barrels of recoverable oil equivalent. First discovered in 2015, and with exploration ongoing.
© Shutterstock FeedGuyana has been hit with a broad 38% US tariff. Except in three areas of particular interest and importance to the US – oil, gold and bauxite, which will face no tariff.
Why should that be? Well, partly because the oil industry is dominated by a US company but in the case of gold and bauxite, because these are important products for the US. Ergo, they get preferential treatment.
With a bit of clever work, maybe we could find a way to demonstrate the value of the UK oil and gas industry to the US. Reinvigorating the business in the process and providing us with some breathing space to transition to renewables.
Is there still life in the North Sea?
There is much potential, even with a “declining” basin. As David Whitehouse, chief executive of OEUK said in late March: “Today we’re on track to produce only four billion of those [13-15 barrels we are expected to require for energy needs] barrels in the UK, but with the right policies to encourage firms to invest we could unlock another three billion barrels and meet half our entire needs.”
This would also add £150bn of gross value to the UK economy.
Now it is true that people weren’t beating down the door of the North Sea Transition Authority for licences in recent years (despite what some might say now). But maybe that was because the economics didn’t make sense – never mind the political atmosphere.
Existing operators are already seeing the impact of our draconian windfall taxes with Harbour Energy reporting in March that its £930m pre-tax profit turned into a £72m loss after tax – an effective tax rate of 108%.
© Supplied by Wullie Marr/ DC ThomWith a little bit of effort, that could change – especially if Westminster and Holyrood start saying and doing the right things.
Then maybe, just maybe, we can attract some of the US majors back and gain some political influence with president Trump. It has the added benefit of giving us a little more energy security during that transition period.
It will, however, require politicians to really change their approach.
In early March (albeit before US tariffs were announced), Ed Miliband, secretary of state for energy security and net zero said: “Oil and gas production will continue to play an important role and, as the world embraces the drive to clean energy, the North Sea can power our Plan for Change and clean energy future in the decades ahead.”
I have no problem with the first of that, but I really would like to see the analysis behind the second part.
But before any Conservatives start pontificating about Labour and SNP policies, I suggest we can do without their faux outrage, given the policies and taxes they imposed on the North Sea during their tenure in power. Who introduced the windfall tax after all?
Am I being naïve in thinking this is a way to help build our relationship with the US? Maybe, but desperate times call for desperate measures – even if just to try. And these are certainly desperate times …
Greg Quinn OBE is a former British Diplomat who has served in Estonia, Ghana, Belarus, Iraq, Washington DC, Kazakhstan, Guyana, Suriname, The Bahamas, Canada, and Antigua and Barbuda in addition to stints in London.
He now runs his own government relations, business development and crisis management consultancy: Aodhan Consultancy Ltd
