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This article states that Scotland's oil and gas reserves and tax incomes are dwindling: http://www.theguardian.com/politics/2014/feb/07/scottish-independence-economic-implications-niesr

Scotland's immediate fiscal position would be in a worse state than the rest of the UK, partly because government spending per person is significantly higher in Scotland, mainly because of higher spending on public services rather than benefits. In 2011-12 this was more than matched by greater revenues from oil and gas, but over the longer term this will not be the case as oil and gas reserves – and the revenues they bring – dwindle.

Is this correct? I read somewhere else that there is plenty of oil left to extract on Scotland's seas and oil companies are just extracting the amount the market demands.

EDITED: Thanks OddThinking for your edited question:

Will Scotland's reserves reduce so much that the costs increase so much faster than prices so that profits (and tax revenues) will drop quick enough, in the next 30 years or so, to significantly affect Scotland's oil and gas current tax revenues?

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  • Oil companies extract what is profitable to extract. If prices or costs change, the amounts they extract will change. Market demand affects price, and the amount easily available affects costs. So what is your question? – Henry Feb 7 '14 at 22:12
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    @Henry: The article predicts a lowered revenue - not because prices will change (although they warn about fluctuation), but because reserves will "dwindle". The paragraph is talking about "immediate fiscal position" "over the longer term", which I read as the next few decades. So I read this as: "Will the reserves have reduced so much that the costs increase so much faster than prices so that profits (and tax revenues) will drop enough, in the next 30 years or so, to significantly affect Scotland - in particular, to put it financially behind the rest of the UK?" – Oddthinking Feb 7 '14 at 22:52
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    @Oddthinking: The UK North Sea (mainly Scotland) has had two peaks of oil production - see oilandgasuk.co.uk/cmsfiles/assets/1715.jpg - the first was caused by the halving of oil prices in 1986 and the second because cheap supplies started to run out and the remaining supplies cost more. Reserves is a fairly meaningless number on its own as it is a calculation of the amounts so far discovered but not yet extracted where the cost of production is below the current price. But since exploration costs money, reserves do not represent future extraction. – Henry Feb 8 '14 at 0:44
  • @Henry: I acknowledge everything you said. If we replaced "reserves" with "supply" in my formulation of the question, would that avoid the trap of equating what we have bothered uncovering with what is out there? – Oddthinking Feb 8 '14 at 5:02

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