Chancellor George Osborne has welcomed the global fall in oil prices, calling the drop a “net positive” in providing UK consumers with cheaper sources of energy, while applying political pressure on Russian President Vladimir Putin.
The statement comes as Brent crude continues to fall, trading on Monday night at just over $60 a barrel.
“We have important oil and gas industries in the US and the UK but nevertheless this is a big boost for American and British consumers and businesses,” he told the Economic Club of New York.
Osborne also said the declining price “puts a lot more pressure on Vladimir Putin” as many expect Russia’s oil industry is capable of withstanding ongoing Western sanctions.
“I don’t think that looks so clear now. The Russian budget is heavily dependent on high oil prices. He might be exposed by this,” Osborne said.
The Chancellor’s positive outlook, however, contradicts the opinion of some analysts, who have argued UK oil businesses, especially those extracting reserves from the North Sea, will experience a decline in real terms in the coming years.
On Tuesday, accountancy firm Moore Stephens said 18 firms working in the oil business had gone bust since the beginning of this year, compared to six in 2013, while declining prices were also causing a fall in capital spending in the industry.
The firm warned this would result in layoffs and fewer projects for Britain’s energy companies.
“The fall in the oil price has translated into insolvencies in the oil and gas services sector remarkably quickly,” said Jeremy Willmont, head of restructuring and insolvency at Moore Stephens.
“The oil and gas services sector has enjoyed very strong trading conditions for the last 15 years, so perhaps they have not been quite so well prepared for a sustained deterioration in trading conditions as other sectors would have been.”
Additionally, energy consultancy Wood Mackenzie predicted that a further 32 European projects would be under threat due to falling oil prices, especially as $55 billion worth of funding was still awaiting approval by European Union authorities.
Other projects that may be threatened by the decline include a £270 million project to drill 22 wells in the North Sea, where it is expected overall net exports will hit their lowest levels since 1997.