Calls for Scottish independence rise even as North Sea oil prices fall

Unionists said the plunge in oil prices would surely put a damper on the independence movement and push Scots into the arms of London after last year's failed referendum. It looks like they were wrong.

The Scottish National Party issued a simple rallying cry for independence when vast oil and gas reserves were discovered under the North Sea in the 1970s: "It's Scotland's Oil."

But the idea of using oil receipts to fund a new nation has repeatedly failed – most recently last September – to convince a majority of voters to support independence. It's a dream that would seem to be getting more elusive, as crude oil prices  fall to less than half of what they were during last year's referendum.

Yet it's not.

Rather than pushing Scottish voters into the arms of London, the oil crisis has done the opposite. Many are questioning decisions made by the British government, and SNP membership has quadrupled to more than 100,000 in recent months. The party is riding high in opinion polls, possibly on course to win enough seats in May's general election to hold the balance of power in Westminster.

Unionists have countered by pointing to the centrality of oil to the SNP vision of independence. British Prime Minister David Cameron has said that only the "broad shoulders" of Britain could bear the burden of falling prices.

Scottish Conservative leader Ruth Davidson argues that Scotland, if independent, would face a budget shortfall of £18.6 billion ($27.5 billion) as a result of the plunge in prices. She blames the SNP government in Edinburgh's devolved assembly for failing to see the current crisis coming.

For their part, Scottish nationalists have accused the British Parliament of mismanaging the North Sea industry, pointing to a series of tax hikes in recent years and the suppression of a 1974 report that predicted that Scotland would become "as rich as Switzerland" if had control of the oil in its waters.

"The gross mismanagement of Scotland's North Sea oil bounty by successive UK governments has left this country more vulnerable in the face of collapsing oil prices than it otherwise ought to have been," says Kevin McKenna, a columnist for the Scottish Daily Mail.

“If there was ever an argument for gaining Holyrood control over North Sea oil revenues then this was it," he adds, referring to the Scottish Parliament building in Edinburgh.

Scottish nationalists and oil experts also accuse Westminster of being slow to react to the current travails of the oil and gas industry. In December, the British government cut the tax rate on companies operating in the North Sea from 32 to 30 percent. Many in the North Sea oil and gas industry argue that the meager tax cut was not enough to stimulate investment in the face of falling oil prices.

Britain's Chancellor of the Exchequer George Osborne is expected to announce further tax cuts when he delivers his proposed budget to Parliament on Wednesday.

Alex Russell, professor of petroleum accounting at Robert Gordon University in Aberdeen, says additional tax breaks are primarily motivated by the forthcoming general election rather than concern for the North Sea

"They are trying to time [a tax reduction] just prior to the general election," Mr. Russell says. "They are playing politics with the future of the North Sea oil industry."

Whatever its future, the North Sea is likely to remain a central question in Scottish politics. Fears are growing that without fresh investment, oil companies could decide to abandon unprofitable fields and begin the expensive process of removing offshore rigs, effectively spelling the end for Scotland's oil industry.

Decommissioning could cost as much as £60 billion ($89 billion). While London has agreed to pay half, how much of the decommissioning bill Edinburgh would be on the hook for if it left the union remains unclear. But the cost of cleaning up Scotland's vast offshore oil industry would likely be a major issue in any future vote on independence.