Page 8: of Offshore Engineer Magazine (Aug/Sep 2016)

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The Barrel

OPINION

Making the best of Brexit he big surprise over the last few should accept and respect that decision, not no immigration, it’s reasonable to

T weeks was of course the UK ref- and get on with it. assume that skilled negotiators (rather erendum decision to exit the European Another important consequence of than politicians) on both sides will

Union (EU). At ? rst sight, it looks like a the vote to leave is that it has shone a ? nd a compromise that affords the UK vote for independence over economics. light on the fragility of the EU. Italian Associate Member status. This would

While the ? rst part of that is certainly banks are on the brink of a crash, and preserve existing free trade bene? ts true, the economic aspect should be Greece shows no signs of an economic without having to negotiate multiple measured in years, and not days or recovery after seven years of recession individual trade deals.

weeks. and needs for a third bailout. Factions As for the threat of another Scottish

None of the politicians on either side in France and the Netherlands want referendum, as a Scottish resident the of the debate emerge with any credit, their own EU referendums. To com- feeling I get is that there is little appetite given the widespread scaremonger- pound matters, European Commission for that on the part of a referendum wea- ing, misrepresentation and duplicitous President Jean-Claude Juncker, an ry population. Moreover, the economics conduct on show. That has now been unelected bureaucrat, has reacted to simply do not add up. Leaving the UK extended post-referendum with calls the vote more like a petulant schoolboy would put the £50 billion of annual than a respected statesman. Scottish exports to the rest of the UK at

The fact is that there is a deep inter- risk (Scotland exports just £12 billion

The big risk is that Brexit jitters dependence between the EU and the to Europe). It would also forego the ex- somehow trigger a global

UK, so it is in the interests of both par- tensive subsidies that Westminster pays ? nancial crisis that signi? cantly ties to come to a deal that minimizes to shore up the Scottish budget de? cit. the damage to both. Contrary to recent In that event a combination of reduced impairs crude demand.

political and media rhetoric, when the public spending and higher taxes would time comes to negotiate its exit from be required. for the EU vote to be re-run and Nicola the EU, the UK will be in a strong As the drama plays out, the US dol-

Sturgeon proposing a second Scottish position given the extent of the UK’s lar’s value continues to rise. That will independence referendum. Both sug- trade de? cit with the EU (£24 billion make it more dif? cult for crude prices gestions represent an affront to democ- in the ? rst three months of this year to continue their upwards march even racy. They are also a big negative from alone) and because the UK contributes though the supply and demand balance an economic perspective because they 12% to the EU budget (? lling the gap is tightening. On the other hand, UK exacerbate the uncertainty around the will be a headache to the remaining companies with US dollar revenues will consequences of Brexit, which in turn members unless a phasing out can be ? nd a welcome tailwind. The big risk jeopardizes key investment decisions. agreed). The big issue is “Freedom of is that Brexit jitters somehow trigger a

Like it or not the people have spoken movement v. Free trade.” Given the global ? nancial crisis that signi? cantly and both politicians and the public UK voted for controlled immigration, impairs crude demand. In that event, crude prices will be well down the queue in our list of worries. In times of

World crude oil and liquid fuels production growth great uncertainty such as these it is al- (million barrels per day) ways best to remember that things rarely

OPEC countries Latin America turn out as bad as we feared or as well

Russia and Caspian Sea North Sea 1.5

Projections as we hoped.

North America Other non-OPEC 1.0

Colin Welsh is head of international energy investment .5 banking at Simmons & Company 0

International, part of Piper Jaffray. He -.5 studied accountancy, economics and law at the University of Aberdeen and -1.0 quali? ed as a Scottish Chartered Accoun- 2015 2016 2017 tant with Ernst & Whinney (now EY).

Source: Data from the US Energy Information Administration.

August 2016 | OE oedigital.com 10 010_OE0816_Barrel_jl1.indd 10 7/22/16 11:36 PM