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The fight between England and Scotland over who should be in charge of North Sea oil has finally begun. Indignant in Edinburgh, the Scottish nationalists have campaigned for a generation with the slogan "It's Scotland's oil," complaining that Westminster squandered their tax money. An independent Scotland would establish an oil fund and invest for the future, the separatists say, but the truth is the oil reserves are dwindling fast – and then there is the horrendous cost of removing redundant offshore oil platforms.

The output of the U.K. North Sea peaked at the turn of the last century, at more than 4 million barrels of oil and gas equivalent. The big discoveries, Brent and Forties, came on stream in the 1970s, just in the nick of time to offset the impact on energy costs of Arab oil nationalism. Their output has since been reduced to a trickle; current U.K. oil and gas production is less than 1.5 million barrels per day (bpd). Government tax revenues last year were just over £6-billion ($11.1-billion), half their peak level. In a report on the future of North Sea oil out this week, the author, Sir Ian Wood, says that better management of the resource – and better cooperation among oil companies – could generate a further 3 to 4 billion barrels, worth some £200-billion to the U.K. economy.

Both the prime minister, David Cameron and the Scottish National Party leader, Alex Salmond, applauded the report and promised to implement its recommendations of better stewardship, more industry cooperation and more incentives for exploration. Sadly, no government is likely to heed the principal message, which calls for a lighter fiscal touch. Discoveries in a mature oil province tend to be small, risk remains high in an expensive offshore operating environment and, consequently, returns are lower, while opportunities diminish. Governments see the natural resource as a cash cow, but the flow of dollars is always bumpy. – low during investment, higher during production and always subject to the volatility of commodity pricing.

When it comes to managing the revenue, there are various ways to skin the oily cat. At the virtuous end of the spectrum is Norway with its colossal oil fund, salted away for rainy day investment. With some $830-billion (U.S.) invested, it is the world's largest sovereign wealth fund, representing $166,000 for each Norwegian and its sheer scale is becoming a management problem, reckons Norway's central bank. At the other end of the prudential scale, arguably, is Nigeria's solution – the Nigerian National Petroleum Corporation (NNPC) which has a majority share in oil exploration ventures operated by foreign oil majors. So riddled with corruption is NNPC that the governor of Nigeria's central bank, Lamido Sanusi, complained in a letter to Nigeria's president Goodluck Jonathan in December, that NNPC had failed to account for the whereabouts of $49-billion in accrued oil revenues. For his pains and his complaint, the president sacked Mr Sanusi.

Most petro-countries, including the U.K., manage their oil rent in a manner somewhere between Norway's Calvinist saving and Nigeria's plundering. Alex Salmond, the SNP leader argues that over four decades successive U.K. governments squandered Scotland's resource. Instead, an independent Scotland would create an oil fund like Norway's, a laudable intention but the question is whether there is enough resource to pay for Scotland's high spending and a honeypot for the future.

Scotland's public services are expensive – 10 per cent higher than the rest of the U.K. and they are already subsidised by British taxpayers – £1,000 per head if you compare average government spending in the U.K. with Scotland or £3,000 per head if you calculate the deficit between Scottish spending and its own tax revenues. Moreover, the SNP is betting future government budgets on the rent from a dwindling resource suffering from high price volatility. And there is an even bigger problem lurking on the horizon: Decommissioning. Redundant oil platforms must be removed and, as an incentive to encourage more investment, the U.K. has offered operators large amounts of tax relief (up to 75 per cent) on the cost of removal. Over the next decade, the government bill in tax forgone will amount to many billions. That's not the makings of a Scottish sovereign oil wealth fund.

There is a wider and deeper debate that underlies the squabble over the oil spoils. Does a preoccupation with huge oil rents so dazzle governments that they neglect the non-resource economy. In other words, we know that oil has been a curse for Nigeria and it is in the process of destroying Sudan but is it even good for squeaky clean Norway?

With the fourth highest GDP per capita, Norwegians definitely have it good. So wealthy is Norway and so high are Norwegian wages that local governments in Norway have acquired residential care homes on Spain's Costa Blanca to look after the elderly. It's cheaper than Stavanger and the old folks like the winter sunshine but there is mounting concern that the shower of hydrocarbon wealth is sapping Norway of its work ethic. Wages have soared over the past decade in Norway while those of its main European trading partners have been static or have declined. There is mounting concern that Norway's workforce is uncompetitive. The country has the third lowest number of hours worked in the OECD and astonishingly high rates of sick leave, with the average Norwegian apparently bed-ridden for up to 8 per cent of his average working hours over the past decade.

It's what they used to call the Dutch disease, how the virus of overbearing hydrocarbon rents crushed the Dutch manufacturing sector. It might seem like a pleasant affliction but it begs the question – what is the purpose of the oil fund if it only cushions the workforce and fails to build a dynamic post-oil economy?

When waves of oil cash washed into Britain in the 1980s, the Thatcher government spent it merrily – it paid the bill for unemployment as the Tories shut down mills and demolished vast acres of ancient industry. Without the petrodollars, the U.K. would probably have gone bankrupt; Britain would have spent decades in hock to the IMF, hamstrung with high taxes and low investment. The oil revenue allowed the U.K. to sidestep Dutch disease while making the transition into a modern, high-tech economy possible with low taxation and a financial services revolution. In short, the oil gave the British the chance to learn to do a new trick. If Scotland does decide to go it alone, it will need to follow a similar path: Forget about the past, and don't hoard. Instead, invest what you have today in learning to do something new tomorrow.