The Energy Trap, The Bubble Market, The Capital Trap

Nearly a year ago, at the premier of filmmaker Fraser Denholm's documentary feature "Run Down Aberdeen", an open floor discussion with the audience followed the screening. During that discussion, local list Labour MSP Lewis Macdonald was heard to say that "high oil prices are good for Aberdeen". As, since the mid 1970's, the Aberdeen economy has become increasingly dependent upon the extraction of fossil fuels from the petroleum fields beneath the raging swells of the central and northern North Sea, for an MSP to make such a statement would seem to be - well - just common sense. Wouldn't it?

But, whenever we're confronted with something which appears to be common sense, as psychogeographers, we're apt to try to have a good look around the back. We're on the same page as grand old man of letters W. Somerset Maugham on this one:

"Common-sense appears to be only another name for the thoughtlessness of the unthinking. It is made of the prejudices of childhood, the idiosyncrasies of individual character and the opinion of the newspapers."

So, what of this common sense claim that high oil prices are good for our town? As an opener, we'd draw attention to our old blog-post "D is for Dutch Disease", in which we examined the inimical effect on our local economy of this over-reliance on the one business sector with particular reference to the resource-extractive aspect of that sector:

OtherAberdeen

The A to Z of Aberdeen, D is for The Dutch Disease

http://otheraberdeen.blogspot.com/2010/07/a-to-z-of-aberdeen-d.html

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The Dutch Disease is a concept in economics which explains how the development of a natural resource extraction business sector (like oil and gas) and its associated economic boom can over-balance an economy, causing decline in non-extractive value-adding sectors - particularly the manufacturing sector, but also in agriculture. The pathology of the Dutch Disease is accompanied by moral decline in the personal sphere (affluenza) and turpitude in the public sector (government) as it becomes entangled with big-money business interests. Hmm... sounds familiar? 

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Since we wrote that, there have been an number of developments. And other than the bland "good for Aberdeen" assertion, we collectively must ask what high oil prices mean: what is the cause; and what is the effect going forward (as they say)?

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THE ENERGY TRAP

Recognition of evidence that global oil production is reaching (or has already reached) the "undulating plateau" at it's historic peak is now no longer the domain of the tin-foil hatters. Today this recognition comes, not from the usual-suspect voice-in-the-wilderness Peak Oiler blogosphere (The Oil Drum, The Energy Bulletin, The Post Carbon Institute and such), but from the likes of the US military, Shell Oil, and the White House.

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United States Joint Forces Command

Joint Operating Environment

http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf

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...by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 [million barrels per day]. 

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Shell Oil

"Signals and Signposts"

http://www.shell.com/home/content/media/news_and_media_releases/2011/scenarios_signals_signposts_14022011.html

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We believe that the world is entering an era of volatile transitions and intensified economic cycles. 

[…] 

Supply will struggle to keep pace with demand. By the end of the coming decade, growth in the production of easily accessible oil and gas will not match the projected rate of demand growth. 

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Le Monde

Washington considers a decline of world oil production as of 2011

http://petrole.blog.lemonde.fr/2010/03/25/washington-considers-a-decline-of-world-oil-production-as-of-2011/

>>>>>> 

The Obama administration of Energy supports the … hypothesis of an "undulating plateau". Lauren Mayne, responsible for liquid fuel prospects at the DoE, explains : "Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline." 

Concern about the future availability of energy dense fuel sources, which will be required to create a transitional and then a sustainable energy infrastructure are beginning to be expressed in academic circles.

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Do The Math

The Energy Trap

http://physics.ucsd.edu/do-the-math/2011/10/the-energy-trap

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Our reaction to a diminishing flow of fossil fuel energy in the short-term will determine whether we transition to a sustainable but technological existence or allow ourselves to collapse. One stumbling block in particular has me worried. I call it The Energy Trap. 

In brief, the idea is that once we enter a decline phase in fossil fuel availability—first in petroleum—our growth-based economic system will struggle to cope with a contraction of its very lifeblood. Fuel prices will skyrocket, some individuals and exporting nations will react by hoarding, and energy scarcity will quickly become the new norm. The invisible hand of the market will slap us silly demanding a new energy infrastructure based on non-fossil solutions. But here’s the rub. The construction of that shiny new infrastructure requires not just money, but…energy. And that’s the very commodity in short supply. Will we really be willing to sacrifice additional energy in the short term—effectively steepening the decline—for a long-term energy plan? It’s a trap!

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THE BUBBLE MARKET

New Scientist

Carbon bubble could threaten markets… maybe

http://www.newscientist.com/article/dn21031-carbon-bubble-could-threaten-markets-maybe.html

>>>>>> 

After the dot-com bubble and the property bubble, prepare for the carbon bubble. Entrepreneurs meeting in the Maldives last week warned that shaky assumptions about future fossil-fuel use are buoying financial markets and that the collapse of this "carbon bubble" could trigger another crash one day.

"There is this suicidal river of capital flowing into fossil fuels," says Jeremy Leggett, a green entrepreneur ... based in London. "Let's get the risk acknowledged."

[…]

According to some studies, in order to have a chance of limiting global warming to 2 °C, humans cannot pump more than another 570 gigatonnes of carbon dioxide into the atmosphere before 2050. Yet a report by energy-industry initiative Carbon Tracker, commissioned by Leggett and others, found that the proven fossil-fuel reserves of companies and countries would add up to 2800 Gt if burned for their energy.

That means up to 80 per cent of known reserves may have to be left in the ground if governments decide to limit total future emissions to 570 Gt.

[…]

Leggett's point, though, is that the carbon bubble is a risk that investors are overlooking. Pension funds, for instance, continue to put their money into gas, oil and coal companies without taking account of it.

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It's not our intention here to examine the alarming geopolitical implications of this onrushing environmental degradation and energy supply bottleneck, chewy and crunchy though that will be. And, let us be clear, global oil production figures have never been higher. However, North Sea oil production is well past its peak, and is falling rapidly.

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THE CAPITAL TRAP

While the oil price per barrel in US dollars peaked at near $150 during 2008 and then fell sharply, the price of North Sea oil has 'recovered' (as they say) and is today trading at $110. And in the intervening period, fluctuations in currency exchange rates have meant that, when expressed in Pounds Sterling or Euros, oil has never ever traded at a higher price. The combination of this all-time record high price along with both record global demand and falling UK output is an unfortunate triple-confluence of global trends for our provincial town. The implications of this co-incidence for the sustainability of high levels of economic activity and employment in our town are troubling, for - as oil reserves diminish - the grinding certainties of geological happenstance and the imperatives of the profit motive insist that it is the more difficult, more expensive to reach reserves which are tapped last - and the cheaper-to-exploit resources are those which are extracted first. The high oil price, for this 'province' (as they say) hastens the day when those easier reserves are gone, and all that remains is the difficult stuff - the reserves which require a high market price for oil before the return on investment realises the cost of exploitation.  (Monetary costs only, that is. There are, of course, many externalities.) But worse even than that, the current excessively high return on investment acts like black hole for capital - sucking in investment which, as the necessity to stabilise and reduce carbon-dependency in our energy supply begins to bite, would be better reallocated towards putting our energy supply on a sustainable, renewable, decarbonised foundation.

Recently, news reports have pointed towards investment growth in support of a burgeoning renewable energy sector; Inverness, Perth, Glasgow, Edinburgh, Orkney all beneficiaries. Alas, little of that investment is directed towards Aberdeen, distracted as our local capital and skill base is towards the glittering prizes of riches wrung from the high-value fossil fuels lying in the convoluted strata kilometres beneath the seabed.

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The Courier

Enterprise area status a boost for Dundee's renewable energy hopes

http://www.thecourier.co.uk/News/Business/article/20374/enterprise-area-status-a-boost-for-dundee-s-renewable-energy-hopes.html

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Dundee's fledgling renewables sector has been given a major boost by being declared as one of Scotland's new enterprise areas.

[…]

It is hoped the dock's new status will encourage companies such as utilities giant SSE to progress plans to make Dundee a key focus of their North Sea renewables plans. The Perth-based company signed a memorandum of understanding with Dundee City Council, Forth Ports and Scottish Enterprise to explore options for a new manufacturing plant to be established at Dundee Port to service the offshore wind sector.

Any such development would create hundreds of jobs directly and in the associated supply chain. 

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But here in Aberdeen the energy trap is compounded by the fossil-fuel-powered capital trap as investment disappears over the event-horizon of record oil prices into the black hole of non-renewable hydrocarbon extraction. And on the streets of our town, excessive pay rates in that extractive sector are visibly disappearing down the sink-sector drain of conspicuous consumption and a grotesquely distended housing bubble. Aspiration (as commonly understood) is all to often demonstrably mistaken for acquisition, and affluence is mistaken for wealth as late-stage consumerism mounts its final stand in the shopping malls of our inconsequential northern provincial town.

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The Scotsman

Scots can cash in on £375bn oil bonanza

http://www.scotsman.com/the-scotsman/scotland/scots_can_cash_in_on_375bn_oil_bonanza_1_1943934

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SCOTLAND’S North Sea oil and gas industry can deliver a £376 billion bonanza over the next 40 years and secure Aberdeen as “one of the global energy capitals” of the future, according to a report published today

The PricewaterhouseCoopers (PwC) study said the oil boom was there for the taking if government and industry leaders can “grasp the many opportunities”. 

Mark Higginson, senior partner at PwC in Aberdeen, said: “We have a remarkable – and potentially unrepeatable – opportunity to position the city as an international energy centre of excellence… However, this isn’t simply going to fall to Aberdeen by right. We need to shape our own destiny and the journey must start now, with everyone focused on a single, definitive strategy that embraces core objectives of maximising oil reserves, exploiting the new frontier areas west of Shetland and the Arctic, becoming a talent magnet and more effectively serving the needs of industry...” 

The study, titled Northern Lights: a strategic vision of Aberdeen as a world-class energy capital, advised stakeholders to collaborate more to build on the city’s long track record in oil and gas, without which there was a risk that the opportunities within reach may slip away.

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Aberdeen City Council

Alternative Energy Strategy for Council Owned Public Buildings

http://committees.aberdeencity.gov.uk/mgConvert2PDF.aspx?ID=13864&txtonly=1

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Whilst each project to develop alternative energy technologies will require detailed analysis and evaluation before being progressed, this strategy will provide the overall context in which future projects will be developed. 

[...] 

May 2011 Version 4Appendix 2: Overview of Available TechnologiesThis strategy will consider a number of alternative energy technologies some of which are outlined below. It should be noted that for Council owned public buildings planning permission for alternative energy technologies is not required unless the equipment is valued over £100,000. 

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[our emphasis]

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Time and again we are frustrated when we see clean, sustainable energy sources, which are available to exploit in abundance all over and around Scotland, referred to by Aberdeen's people and businesses as "alternative energy". The use of that phrase "alternative energy" is telling. It tells you everything you might want to know about the people and businesses that use it. Rather than use words like "sustainable" or "renewable" or "clean" when discussing non-polluting energy sources they instead label these sources of energy as "alternative". In the UK, the use of that word has pejorative connotations, usually to do with "alternative" lifestyles like strict veganism, communal living, far-left political beliefs or religious cults or other hippy-dippy stuff which is to be mistrusted, feared, scorned and therefore belittled whenever possible. By using this kind of language the people and businesses of Aberdeen show that their default position associates clean energy sources with questionable fringe actives and beliefs which are to be scorned. This sets the context in which they frame their discourse and actions, for language is never neutral.

And thus we despair that it's becoming increasingly unlikely that significant capital will be reallocated away from the atmosphere-threatening hydrocarbon industry to build a sustainable local economy based upon clean energy sources here in time to secure the vaunted title "Global Energy Capital" [sic] which local business development companies claim for our town. For the one-way-bet certainty afforded by an oil-price which, despite globally defective demand; despite recession or depression, remains proudly above the psychologically significant $100 per barrel mark is a huge distraction to capital, which (as we have all seen since 2008) always discounts the future.

Flashing like the urgent "HOLD NOW" buttons of a slot machine stuck on a jackpot payout, this ton-high oil price militates against any thought of significant reallocation of capital crossing the minds of the oil companies and their executives here. The certain play of continued and renewed investment in the oil-bearing strata beneath the seas of the UK's continental shelf satisfies the needs of capital oh so much more than adequately. Why would capital (the need to increase itself being its primary reason for existing - integral to its true definition) redeploy away from so certain a one-way bet into something a just little more risky?

The tickers tick up on global heat budget, CO2 concentration, social inequality, species extinction, deforestation, ocean acidification, resource depletion and political instability and conflict. But the ticker also ticks up - ever up - on the free-market price of a barrel of oil. That same ticker begins to look like a countdown to the deadline for establishing a sustainable economic future for Aberdeen. The high oil price an obstruction, a distraction. It's in the way of the future.

Local labour politician Lewis Macdonald stated at the screening of 'Run Down Aberdeen' that "high oil prices are good for Aberdeen". Politicians, it seems, also discount the future.

Unfortunately, we have to live there.

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Hazlehead Externalities

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Long before you can see it, you can smell it; the outdoor odour of hot fried onions being remarkably similar to that of unwashed underarm sweat. Before you can see it, you can hear it; the diesel genny's farting thrum is no respecter of horticultural serenity. Those canned drinks have just godda be served cold!

The school term having just started, and this visit being made at lunchtime, many children from Hazlehead Academy (those both in the know and in the money) were seen queueing for their quarterpounder cheezeburgers and chips and Coke. All children being willing addicts of these foodstuffs, their preference is bound to run to the burgervan over municipal school dinners. 

And we wonder: is that OK? Did the process of awarding this catering concession take this into account? Or is it an unforeseen consequence. And we wonder, as we would, how did this concession come to be awarded to the burgervan of 'Monster Catering'; how much do they pay and to what controls are they subject? And in any case, just who exactly is the customer here? Which party is providing the feed and which party is the consumer?

And we wonder why the already existing modernist snack kiosk, only ten yards from the burgervan - with its already-plumbed and wired services cannot be used by the concessionaire. Indeed, we wonder what has happened to the once stately café, now boarded up and seemingly abandoned, where friends enjoyed French fancies not four months ago. It is said that the market serves all needs. And the burgers are good (not to try is not to know) and the schoolkids are very happy today. But it is clear from the scenario playing out in our town's Hazlehead park that the market both discounts the future and ignores inconvenient externalities.

If you turn your back on the noise and smell of the burgervan and walk past the soon to be derelict restaurant café, (its unique jasmine planting commemorates the pro-democracy struggle of Burmese political activist Aung San Suu Kyi), there, near a car-park you'll find a garden of stonework pods which show historical episodes from the life of Robert the Bruce in concrete-pressed bas-relief. And to think - Councillor Kevin Stewart, when he commissioned that new statue which sits outside Marischal College said that the town had no commemoration of The Bruce! It is particularly interesting to note that one of the reliefs actually has the courage to depict the historically difficult 'Harrying of Buchan' episode, though we don't think it quite manages to do justice to the full extent of the ethnic cleansing genocide, systematic rape and managed campaign of terror, demolition, fire-raising and eradication meted out to the people of this region by Bruce. Shame.

Although much of the park is already derelict and not open, if you continue walking west past what we understand is the second-largest municipal maze in the UK (now free entry, yay!) you'll walk through some well-tended gardens, putting greens, sculpture courts. And at last, the smell of the burgervan and the noise of its noxious generator fades, to be overridden by the spicy fragrance of rhododendron and the twittering of little birds respectively. 

But the Queen Mother garden is suffering from austerity cut-backs.

But next plot to that, the Piper Alpha memorial garden is in good shape. Like the Queen Mother garden, it's the sort of formally laid-out rose-garden very common in Scotland, and that's OK. No risks were taken, no-one was offended.

If any readers don't know about the Piper Alpha disaster, click here.

The Piper Alpha memorial sculpture is emotionally engaging and moving. The three figures, with their attitudes, gestures and clothing, are replete with meaning and symbology. In a still moment, alone with the sculpture, you might just begin notice the tiny things which our photos cannot show. You might begin to feel stuff. If you're old enough, you'll remember stuff. 

But when these photos were taken, the Piper Alpha garden was being tended by two municipal gardeners who had a portable radio with them. Its ill-tuned pop channel was crepitating a cacophonic dancefloor remix of Jerry Rafferty's 'Baker Street' across the formal beds. I did my best to ignore it and took some more photos. A third gardener, older, appeared. Brown-sharn-smudged high-visibility tabard and trousers orange and lemon - suddenly framed at the entrance to the rose garden - he suddenly appeared and started hollering at the other two. Something to do with the order in which they were doing the work, or they were doing it all wrong or something, I don't know. The two with the radio started gesturing obscenely and taunting the newcomer, taking the piss, humiliating him. This sent him into a rage and his shouts became louder and more indignant. The two turned off their radio, the better to hear and laugh at the exhortations of the third who was by now charging towards them, waving his arms about, an incoherent stream of invective issuing from his spittle-flecked lips. Thinking it best not to intrude upon private grief, I withdrew back to the Queen Mother garden, and mooched around for a few minutes. 

When I returned to the Piper Alpha garden, all the gardeners had gone. There was peace and space and air and light in which I could now contemplate the memorial, its 168 engraved names, that dreadful night. 

Then I began to remember.

Then I remembered something of that time...

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With thanks to reader Peter

for the inspiration and ideas which led to this post

Entropic Modern

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With a nod of thanks to the correspondent who recommended the art of Gair Dunlop, and gratitude to Gair himself for the quality of that work, which we enjoy again and again in the variety of projects of his which are online. We're sure Gair won't mind us borrowing the name of his blog - Entropic Modern - for this post.

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As we explore the urban environment of our isolated northern energy-boom town, we encounter modernist buildings and places, spaces and atmospheres designed or otherwise which put us in mind of the observations invoked by Gair Dunlop's art. The sense of a future that never quite got here, the sense of an unfulfilled promise. A feeling that something civilisational peaked at some point towards the end of the 20th century, and - its reach exceeding its grasp - that something, whatever that something was, is now ebbing away...

We remember the 1960 film of HG Wells' 1895 novel The Time Machine in which a time traveller projects himself from fin de siècle into the far future where he finds a society of enervated, illiterate vegitarians - the Eloi - living amid the splendrous ruins of an impressively advanced modernist civilisation. In the film, the Eloi are viciously preyed upon by a degenerate species of de-evolved humans - the Morlocks. But the cold-war exigecies of the day meant that the 1960 film made some significant elisions to the original Wells text and its societal and political implications.

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http://en.wikipedia.org/wiki/The_Time_Machine#Plot_summary

[...]

Time Traveller tests his device with a journey that takes him to the year 802,701 A.D., where he meets the Eloi, a society of small, elegant, childlike adults. They live in small communities within large and futuristic yet slowly deteriorating buildings, doing no work and having a frugivorous diet. His efforts to communicate with them are hampered by their lack of curiosity or discipline, and he speculates that they are a peaceful communist society, the result of humanity conquering nature with technology, and subsequently evolving to adapt to an environment in which strength and intellect are no longer advantageous to survival.

Returning to the site where he arrived, the Time Traveller finds his time machine missing, and eventually works out that it has been dragged by some unknown party into a nearby structure with heavy doors, locked from the inside, which resembles a Sphinx. Later in the dark, he is approached menacingly by the Morlocks, ape-like troglodytes who live in darkness underground and surface only at night. Within their dwellings he discovers the machinery and industry that makes the above-ground paradise possible. He alters his theory, speculating that the human race has evolved into two species: the leisured classes have become the ineffectual Eloi, and the downtrodden working classes have become the brutish light-fearing Morlocks. Deducing that the Morlocks have taken his time machine, he explores the Morlock tunnels, learning that they feed on the Eloi. His revised analysis is that their relationship is not one of lords and servants but of livestock and ranchers, and with no real challenges facing either species.

[...]

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http://www.cryptonomicon.com/beginning.html

Neal Stephenson

In the Beginning was the Command Line

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Contemporary culture is a two-tiered system, like the Morlocks and the Eloi in H.G. Wells's The Time Machine, except that it's been turned upside down. In The Time Machine the Eloi were an effete upper class, supported by lots of subterranean Morlocks who kept the technological wheels turning. But in our world it's the other way round. The Morlocks are in the minority, and they are running the show, because they understand how everything works.

The much more numerous Eloi learn everything they know from being steeped from birth in electronic media directed and controlled by book-reading Morlocks. So many ignorant people could be dangerous if they got pointed in the wrong direction, and so we've evolved a popular culture that is (a) almost unbelievably infectious and (b)neuters every person who gets infected by it, by rendering them unwilling to make judgments and incapable of taking stands.

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The below-ground life of the Morlocks in The Time Machine makes us think of the recently-published musings of those who would influence the future of the built environment in our town. In their recently published and hubristically titled "Genius Loci" document (beware - direct download PDF), we can read about their obsession with covering streets over, with putting shops and public spaces underground and under domes. We cannot understand this obsession. We cannot understand why these people are afraid of the sky. Maybe, because our town's predominant hydrocarbon industry is responsible for putting the "fear" in the atmosphere, our business community would prefer that we not look at the sky, out of shame for what they are doing to it.

These business interests would plan for us an underground life, just like depicted in  another other sci-fi film of the latter part of the 20th Century - 1976's Logan's Run  in which the population are shown inhabiting a futuristic underground setting (actually filmed in the then relatively new and thrilling underground shopping malls of Dallas and Forth Worth) where they enjoy an orgiastic lifestyle of unrestrained consumption in a consequence-free environment. But then, as we watch, we learn that the consequence they must face is a mandated limited lifespan with compulsory euthanasia administered during the spectacle of a quasi-religious ceremony at age 30. Those who try to flee from the society (the freedom-seekers know as "Runners") are ruthlessly hunted down by paramilitary death-squads known as "Sandmen".

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So now, as we range over the decaying of the modernist dream on the streets of our town - a dream from an era when optimistic people with altruistic visions believed in good faith that they could improve society as a whole from the top down - we detect an interesting parallel decay in the discourse of our time. Whereas once it was believed that the the economy and society could be planned and structured to work for the benefit of all its members with equality and justice, now such beliefs are regarded with more contempt even than fringe cult faiths and are thought to be illiberal and totalitarian in intent. Whereas once it was thought that rationality and the scientific method could iterate a design for life and improve lives, now our faith is in market-based solutions and minimum government intervention - indeed, a minimal state - to allow Hayek's "spontaneous order" to emerge from below.

The message we see in the decay of urban modernism is a message of freedom, written in the dust for those who know how to read it: No-one is going to design our lives for us. Society (if it exists) does not care and will not care. It is up to us as free individuals to choose what we will be.

Eloi or Morlock? Sandman or Runner?

Twenty-eight Percent.

Last night, we were along to Peacock Visual Arts to attend the premier screening of Fraser Denholm's timely and apposite documentary film: "Run Down Aberdeen."
(Own-trumpet-blowing warning: Other Aberdeen's Alan was one of Fraser's interviewees in the doc.)

The film was followed by an open-floor and panel discussion, with the film-maker Fraser flanked by local politicos Deputy City Council Leader Cllr Kevin Stewart, Cllr Martin Greig and Lewis Macdonald MSP.

Here's the film to watch online - pass it on:


Run Down Aberdeen from Fraser Denholm on Vimeo.

We'll write a bit more about the film and the issues it covers later today, but for now we want to explore one particular statistic - mentioned in just one sentence during the floor discussion - from our Deputy Council Leader, Cllr Kevin Stewart.

A question from the floor relating to Aberdeen's role in the Oil and Gas industry was being handled by the panel. Labour and SNP agreed wholeheartedly that Aberdeen was an "economic powerhouse". And that's not just for the North East, but for the whole of Scotland and the UK, according to Lewis Macdonald MSP. Deputy Council Leader, Cllr Kevin Stewart, said that Aberdeen contributed 28% of UK tax revenues to the UK Exchequer.

This is not true. And the fact that both Stewart and Lewis believe that it is tells us more about these politicians than they mean it to. Just have a think about it... that statement suggests that of all the revenue collected by the UK government, more than a quarter comes from the economic activity of less than half-a-percent of the population. What an assertion to make! Really, if this were the case the whole world would beating a path to our small corner to learn the secrets of our special sauce.

But we've seen this error trotted out before by local press and local business-sector bloggers. (We trust that it is a genuine misunderstanding - and not a willfully disingenuous manipulation - politicians wouldn't do that, would they?) So, let's see where the source of the error comes from:

Firstly, like all misunderstandings of this type, it contains a kernel of truth. The 28% figure is within this document (big PDF) from special-interest business lobby group Oil & Gas UK.
[Edit: The figure has actually been revised recently, and now stands at 30% - even more than Cllr Stewart asserts!]

But, that 28% figure relates to Corporation Tax revenue - not all revenue, and it relates to the entirety of the oil and gas sector, not just the 'upstream' (finding and getting) activity which dominates business in Aberdeen.

So, for the avoidance of doubt, Oil & Gas UK rightly assert that the oil and gas industry generated 28% of UK corporation tax receipts during the tax year 2008/09.  But ask yourself: "What else happened during that period?" It's then quite easy to see why the oil and gas industry banked more than the "Square Mile in London" (as has been said elsewhere) at that time: As the oil-price spiked to that $147/barrel record, the energy companies enjoyed windfall taxable profits against the dark background of the financial sector falling into more-or-less ubiquitous loss. It is also relevant to point out that many UK Oil & Gas sector companies operate in a variety of overseas locations, but are stock exchange listed in the UK.

It is also telling that our local representatives to attempt to attribute the entirety of that oil and gas activity exclusively to this town. This is risible. Upstream (finding and getting) oil and gas is a cost centre for the energy companies. Profits are generated in transport, refining, trading, electricity generation & transmission and value-added retail. None of which impinge much on this region. We are exasperated that this boosterism based upon fallacy continues to characterise the discourse in this town and is continually repeated by our local press and politicians. We find it a bit nauseating.

Our local politicians appear to have fallen into the trap of believing Aberdeen's hubristic self-styling as Oil Energy Capital of Europe. It is not. London, Rotterdam, Paris and Moscow vie for that title. No-one outside Aberdeen who works in this huge industry which spans many regions and activities calls Aberdeen "Energy Capital of Europe". When these people in the industry outside Aberdeen hear the term they snigger, as a rule. In the words of novelist Cristopher Brookmyre:

"Europe's Oil Capital. Honestly. The first time he heard the expression, he'd assumed it was a bit of self deprecatory humour. That was before he learned that there was no such thing as self-deprecatory humour in Aberdeen, particularly when it came to the town's utterly unfounded conceit of itself."

Now, please don't misinterpret what we're saying. There's definitely much to be proud of in the business world in Aberdeen "City and Shire" (ugh). But there's no need to "enhance" these good things with disingenuous or demonstrably false hubristic misrepresentations which make us look vaingloriously stupid. To do so devalues that which is genuinely good and praiseworthy about our town. To do so undermines our standing amongst our competitor regions. And to do so undermines calls for greater support from central government and other non-governmental actors - help which Fraser Denholm's pertinent and well-timed new documentary aptly demonstrates that we need.

The future will contain many challenges. We need to face them with open eyes and realism. As we've said before, oil and gas reserves are finite. The day will come when we will all dearly wish that we had started down the difficult road of re-balancing our energy supply earlier than we have. In Aberdeen we will, additionally, wish that we had started down the road of re-balancing our local economy a little earlier too.



At Other Aberdeen we greatly fear that the currently high oil prices, the hubris they inspire and the offensive (and, as we have seen, ill-founded) triumphalism they provoke militates against the redirection of capital towards the development of a sustainable economy in Aberdeen, be that in the shape of the switch to renewable energy technology, the burgeoning development of the Scottish life sciences sector or other more traditional business sectors. We, unsurprisingly, would be happiest to see the creative and arts sector help lead in the regeneration of Aberdeen's built townscape and business landscape through grassroots bottom-up inclusive creative initiatives. We were gratified to hear during the panel discussion that Lewis Macdonald MSP supports this hope.

But then, there we were, at Cineclub hosted by Peacock Visual Arts. Should we have been surprised to see a politician (who is seeking re-election) wearing his metaphorical "I support the Arts" badge? Not for the first time this week, we realise that to ask the question is to answer it.

Cognitive Dissonance, Churnalism, Think Tanks, Category Errors and Social Division

We couldn't help but wonder at the brain-clanging contradiction of some of the news about and affecting Aberdeen this week.

Firstly, on Monday, we had very upbeat local press and TV reports "Aberdeen to lead in economic recovery" This is from local TV station STV.

Aberdeen has been named one of the “cities to watch” as it is predicted to help Scotland come out of the recession and be protected from the effects of the Government's spending cuts.

The Grantite city is best-insulated from the economic impact of the government's spending squeeze and the best-placed to grow out of the economic downturn, the Center for Cities said.

Well, that sounds like great news! We noticed that local newspaper The Press and Journal (P&J) displayed street banners which said something like "Aberdeen: The Economic Dynamo That Will Pull UK Out Of Recession". (To be as fair as possible, the actual headline was marginally less hubristic "Aberdeen a key city to power UK recovery". Yet the following day we saw: City council confirms 900 jobs to go. And the day after: Double-dip fears grow as recovery nosedives. So, what's really going on? This needs a closer look...

The articles on the Monday spoke to and of a certain hubristic character in Aberdeen, one which we've mentioned before, and one which novelist Christopher Brookmyre fingered in his novel A Big Boy Did it and Ran Away.

Europe's Oil Capital. Honestly. The first time he heard the expression, he'd assumed it was a bit of self deprecatory humour. That was before he learned that there was no such thing as self-deprecatory humour in Aberdeen, particularly when it came to the town's utterly unfounded conceit of itself. It was a provincial fishing port that had struck it astronomically lucky with the discovery of North Sea oil, and the result was comparable to a country bumkin who had won the lottery, minus the dopey grin and colossal sense of incredulous gratitude. The prevalent local delusion wasn't that the town had merely been in the right place at the right time, but that it had somehow done something to deserve this massive good fortune, and not before time either.

We remember similar reportage in May last year when Aberdeen was given a "Top Rating" in an international survey for quality of life. What the local press failed to report then was the context of the survey. While rightly saying that "London is the only British city placed higher than Aberdeen", what the report did not say was that only 2 towns in Scotland were included in the survey; Glasgow and Aberdeen. In the the rest of the UK, the report only included the four towns Belfast, Birmingham, London and Oxford. We all know that the results would have been very different if had included the likes of Manchester, Edinburgh, Cambridge, Bath, Bristol, Cardiff, Leeds, York, Norwich, Brighton, Portsmouth, Southampton, Leicester, Swansea, etc. all of which were excluded from the survey.

Moreover, a little look at what exactly the purposes of the survey were proved enlightening. The survey was undertaken by global human resources consultancy employment agency Mercer. One of the activities of Mercer being to set up global moves for expatriate employees for whom they are agents. The quality of life survey is produced by them to help employees demand 'compensation' from their employers by way of hardship payments. The baseline is 100. Aberdeen's ranks below that 100 base. We might therefore provide our local press with an alternate headline:

Human Resource experts recommend hardship payments for international workers coming to Aberdeen.

But that wouldn't play well to our civic hubris reality distortion field, would it?

Returning to this week's overblown press reports of Aberdeen's economic dynamism, we note that the stories were prompted by this press release from the Centre for Cities "think tank". We can see that both the STV and P&J reports have simply cut-and-pasted text from the press release into their reports. This process is known as "churnalism", a practice exposed in depth in Nick Davies book Flat Earth News. The book was reviewed at the time in The Independent Newspaper as painting "a damning picture of a dysfunctional national press which is spoon fed by government and PR agencies and incorporates wire copy into stories without the most cursory fact checking." Clearly this practice is as widespread, if not more so, in the regional press as in the national.

The Centre for Cities think tank (or "policy institute") declares itself as independent and non-partisan. Fair enough. In the same declaration they say that they are committed to improving the economic performance of UK cities - but there is no immediate mention of the social, environmental or communitarian aspects of the urban sphere. Cities are, of course, more than just the sum of the businesses which operate in them. The Centre for Cities does recognise this, and in their report "Grand Designs" heralds and recommends a wholistic approach to urban liveability, which they recognise as a prerequisite of improved economic performance. They say:

• Local and national politicians should accept that using regeneration plans to ‘go for growth’ hasn’t worked in every urban neighbourhood and can have negative as well as positive consequences on a city’s economy and residents.
• A new way forward might mean building a park rather than a science park, or turning tiny terraces into larger homes, rather than knocking them down and building one bed flats. Communities should be given the power to decide on plans, testing out the neighbourhood planning approach expected in the Localism Bill.

Naturally, we approve. These recommendations are, of course, in contrast to initiatives announced and facts on the ground here in Aberdeen. And, unfortunately, in the Cities Outlook 2011 report (PDF), the Centre for Cities has looked only at the broad statistics which relate to economic performance without looking at the context in which those statistics sit.

For instance, the report is completely correct to point out that unemployment is low in Aberdeen when compared to the national average. But this is also true of other areas which are either rural or have a large agricultural hinterland and, therefore, primary-sector economies. Orkney, for instance, has lower unemployment than Aberdeen. It doesn't make Aberdeen a place with an especially dynamic or diverse and nimble economy. Check out our earlier post about Dutch Disease. Primary sector economies (agriculture, fisheries and resource extraction) have a lower equilibrium (or 'natural') rate of unemployment than economies based upon manufacturing, retail and services. In this second category a higher equilibrium rate of unemployment is required to maintain the profit rate. As the economy approaches full employment, wages are bid up and a crisis of profitability ensues (UK 1960 - 1973). In primary sector economies, no such 'reserve army of labour' is required, as wages are determined by yields and commodity prices, while the profit rate remains constant.

The Cities Outlook 2011 report compares Aberdeen with Milton Keynes, Reading, Leeds and Bristol. We feel that this is not comparing like with like. These other cities have diverse economies based on businesses which operate in secondary sector (value-added manufacturing) and tertiary sector (services). These four other cities create their prosperity and wealth via the judicious operation of capital combined with innovation which creates value. In Aberdeen, our primary sector economy dictates that we primarily sook what wealth we have from beneath the seabed, the value of that wealth being determined on international markets which no amount of local innovation or judicious operation of local capital will influence.

The Centre for Cities made a category error when they linked Aberdeen with these other four cities. Our local press has compounded and exaggerated this error, and indeed today continues to do so, calling for next generation broadband connectivity to "let Aberdeen lead [the economic] recovery". We are exasperated that this boosterism based upon fallacy continues to characterise our town, both in the local press and amongst credulous bloggers who's cupidity is such that they allow it to amplify their gullibility.

Now, let us not be misunderstood, there's much to be proud of in the business sphere in Aberdeen. But there's no need to try to enhance these good things with slavish cant which actually misrepresents reality. To do so devalues that which is genuinely good and praiseworthy. To do so undermines our standing amongst our competitor regions. And to do so undermines calls for the greater support from central government which will be necessary if we are to progress successfully through the transition to renewable energy. The rebalancing of our economy means changing from reliance on primary sector activity into exploiting secondary and tertiary sectors in the burgeoning renewable energy market. This will not be easy.

Despite all this, the reports are right to an extent. High oil prices do mean that the immediate and medium terms looks like being a profitable time for our local primary sector industry. However, affluence for some is not the same thing as wealth for our town as a whole. Aberdeen is already one of the most socially divided towns in the UK, with the most uneven income distribution in Scotland. The immediate economic prospects for our town suggest that this trend will only continue.

A handful of extremely wealthy tycoons and their executives will give our town a veneer of affluence, while the remains of the city and its society rot away beneath. Outsiders like the Centre for Cities might continue to see the veneer. Aberdonians will have to live with the rot.