Scotland's oil slick: The fall in the price of crude will be painful, but in the long term it could help rebalance the economy

It is impossible to watch the plummeting price of a barrel of Brent crude without recalling the Scottish referendum campaign. An oil price roughly double where it now stands was the principal assumption behind the SNP’s claims for the plausibility of Scottish economic independence. To be fair, these were widespread assumptions, and some experts might have judged them too low. But geopolitics and the rapid exploitation of American shale reserves have turned the world of natural resources, and the Scottish independence argument, upside down.

Had the Scottish people actually voted Yes to regain their political freedom last September, quite a few of them might now be starting to feel a little queasy about their immediate prospects. Had the referendum vote been held now, say, the margin for No might well be much greater than it was last autumn.

If there is to be a second referendum later this year or next year, forced by public opinion in Scotland and the failure of the Westminster parties to deliver on their promises of devolution, it might well also result in a No vote, if oil stays where it is or even drifts lower. Material considerations, for good or ill, were a marked feature of the independence debate, and it is much harder to make the case that Scotland would be better off outside the UK if a main export is earning half what it was.

Which is why the Governor of the Bank of England, a Canadian who has no cause to be anything other than neutral in these matters, described the collapse in the oil price as a “negative shock” for Scotland. The fact is, as Mr Carney argued, Scotland does now benefit from the automatic stabilisers that apply from being integrated into a much larger economy – public spending necessarily going higher just as tax receipts, especially from the North Sea, are being depressed. The UK Government is able to work with Edinburgh to help mitigate the blow to the local economy around Aberdeen. The burdens are shared: that itself is an eloquent argument for the Union.

“It’s Scotland’s Oil” has long been a potent slogan, and there is much to be said for it. Whether Scotland got her fair share of the oil revenues during the best years of the North Sea’s bounty is doubtful.

Now oil production has peaked in any case. Longer term, Scotland needs a more balanced economy. It has long been distorted by dependence on the value of oil, necessarily a volatile commodity. The fall in the oil price will be painful, but it may presage a switch of resources into other activities that are more dependable for long-term prosperity. Being a petro-economy, in other words, brings its problems as well as its delights (as Russia too is discovering).

Even the Gulf states understand that sooner or later the fossil fuels beneath their feet will run out, or, as we see with shale, the world will find alternative sources of energy. It would have been better if the oil revenues had been invested in a Scottish sovereign wealth fund, or otherwise invested in Scotland’s future.

Given that they were not, it seems an imperative that Scotland should, at last, gain greater control over her oil, devalued as it now is. But the aim should be to use it to build a more productive, sophisticated industrial base. A new constitutional deal with maximum devolution this year should help that become a reality.