Some Aspects of the Impact of Oil on the Shetland Economy

Abstract

This study analyses the impact of oil-related developments on output, incomes and employment in Shetland. An Input-Output approach is adopted based on a Shetland transactions table constructed by the author. Using this, the pre-oil Shetland economy is analysed as base for assessing oil impact. Three major oil activities are identified and their local effects estimated: Supply Bases, the Sullom Voe Tanker Terminal, and Oil-related Construction. Estimates of the impact of these on local activity are given in aggregate and on an individual industry basis. Appropriate oil sector 'multipliers' are derived. Attempts are made to modify the basic estimates by allowing for 'negative multiplier' effects, induced investment and other elements of impact excluded in the basic model. Finally, the possibility of oil-induced changes in local technology is considered and its implications for the preceding impact estimates discussed. In the conclusions the results of the previous analysis are drawn together and some policy implications suggested by them are considered briefly.