By Rab Bruce’s Spider

So growth in the economy has slowed and the Scottish media were quick to put the blame on the low oil price.

Now, I’m an amateur when it comes to economics, but something didn’t quite ring true about this.

Economies are complex things and even expert economists disagree about how they operate, so pinning the blame for poor growth on the oil price seemed a bit simplistic. Nobody can deny, of course, that the slump in oil prices has had a profound effect on the oil and gas industry, particularly in areas like North East Scotland where the extraction costs of oil now exceed the price per barrel that can be obtained. The effect on the people involved has been pretty horrendous, with BP announcing just yesterday that they are making another six hundred people redundant. That’s on top of the thousands of jobs already shed in Scotland alone, never mind in the rest of the world.

But does this downturn explain the poor UK growth figures? I would have thought that every other sector of the economy would see some sort of uplift from the low oil price, particularly when you consider the howls of anguish from businesses when oil first hit $100 per barrel because this would increase their costs.

The low oil price should be having other effects. We have seen lower petrol prices at the pumps and lower costs of fuel must surely be helping pretty much any business you can think of which requires transportation to deliver its goods and services. What I’m getting at is that businesses are always complaining that high costs hamper their efforts to grow but any business person who complains that his or her business cannot grow because their costs are too low really shouldn’t be in business at all.

But this knock on effect does not appear to be happening. If costs are low for transport, for delivery of goods, for the public who can use their cars to get about, why is growth slowing? Is the oil and gas sector really so huge that the lack of spending by oil companies outweighs all other sectors of the economy?

Not being an expert, I went onto Twitter and asked a few economists whether it was right to blame the low oil price for the poor growth figures in the UK economy. Only one, Ann Pettifor, responded and her comment was, "Good question." A few other people, whose expertise and experience couldn’t be confirmed, chipped in with supply and demand comments suggesting that the collapse in US oil company capital spending is indeed to blame although I still struggle with the inference that the US oil sector outweighs all other sectors. One or two people agreed with me that, although there is a correlation between oil prices and the economy as a whole, this does not necessarily equate to cause and effect.

Ann Pettifor then posted a link to an article she wrote in August last year which you can read at:

http://www.primeeconomics.org/articles/how-western-capitalism-laid-china-low

In essence, what she is saying is that the real cause of economic gloom at the moment is the high public and personal debt, wage depression and austerity. In other words, the very economic Road to Recovery that the Tories are pushing us down is what is causing the problem.

Ann Pettifor is not the only economist saying this sort of thing but, so far, the establishment have a hold on the narrative which is being played to the public and the Scottish media were quick to follow the official line by blaming the oil price. One can only presume that this was little more than an attempt to convince the Scottish public that an independent Scotland could not possibly cope financially with oil prices being low because, of course, there is no other sector in our economy which creates jobs or wealth. This is little more than propaganda and we really need to counter it. Yes, the oil and gas sector is important and a large part of our economy but it is certainly not the only one, no matter what the Scottish media try to tell us.