Why cheap oil could mean a Labour victory

BP’s profits are down, and the oil giant is slashing up to $6 billion out of its investment plan for the year. At Shell, the cut could amount to $15 billion over the next three years. At troubled BG, still waiting for new chief executive Helge Lund to arrive, capital spending will be a third lower than last year. I wrote recently of ‘consequences we really don’t need’ as the oil price continues to plunge: cheering though it is for consumers (and good for short-term growth) to find pump prices at a five-year low, the full impact will not be felt until a decade hence, when projects cancelled now might have come on stream to ease supply in whatever cat’s-cradle of conflict afflicts the world by then.

Meanwhile, at an ‘emergency summit’ in Aberdeen, industry leaders send pleas to George Osborne to cut taxes on North Sea production. And with many local jobs at risk and house prices falling, Aberdeen itself is declared a red-alert danger zone for mortgage lenders.

Bank of England governor Mark Carney warned last month of a ‘negative shock’ to the Scottish economy that would be ‘substantially mitigated’ by current UK fiscal arrangements — but not, we deduce, by any further shift towards Scottish independence. To the extent that wavering would-be SNP voters grasp this message, Labour’s chance of holding its Scottish seats and thereby winning Westminster power must be improving. A Miliband government really would be an unwelcome consequence of cheap oil, though a failure to take the Gordon seat (which includes the north of Aberdeen) by the SNP’s Alex Salmond — whose credibility surely mirrors the falling oil graph — might be some small consolation.