Economics Ideas Exchange (EIDX)

UK's oil trade deficit emerges

Based on article from 'The Times', 10 February 2006

It has emerged that Britain has dived into the red on trade in crude oil for the first year since the late Seventies, during the premiership of Margaret Thatcher. Since the 1970’s, Britain has exported North Sea crude oil worth over £198 billion and imported £128 billion worth of crude oil. But after becoming a net importer of crude for a large part of the second half of last year, Britain has recorded its first trade deficit in oil since 1979.

Britain’s exports in oil over 2005 have been eclipsed by the current oil thirst, with imports of about 55 billion tonnes of oil, worth £11.4 billion compared to the 50.2 million tonnes exported worth £10.9 billion.

This has raised concerns about Britain’s dependency on imported oil from politically instable parts of the world in Russia and the Middle East. This weekend, finance ministers from the Group of Seven will use a meeting with Russia to ensure security of the supply of oil.

The Treasury has blamed the deficit on temporary production shutdowns in the North Sea as a result of fires on two of the rigs.

The oil deficit has sent Britain’s overall current account deficit to a record of £65.4 billion, up from £62 billion in 2004. It is expected that the goods deficit will account for 5.4% of national income, the highest since hitting 6.3% in 1974.

However, Britain’s exports to China were 18.4% higher than last year and figures from India show positive signs as exports to India rose by 25% over the course of 2005.