Black Gold, or Fool’s Gold? North Sea Oil, Dutch Disease, and the Fortunes of British Manufacturing

The emergence of Britain as a significant oil producer in the mid-to-late 1970s seemed to open up a brave new world of possibilities. But this newfound optimism soon gave way to bitter disagreement as the spectre of “Dutch Disease” loomed large, and questions abounded as to whether oil exerted a pernicious impact on the fortunes of the manufacturing sector. The empirical analysis herein uncovers evidence supporting core facets of the Dutch Disease hypothesis, thus vindicating earlier warnings foretelling an atrophy of manufacturing. Nevertheless, other significant factors were in play alongside oil, hence I speak of an oil-aggravated rather than oil-induced deindustrialization.