Oil Bust Hits Pockets of Aberdeen's Diamond Merchants
(Bloomberg) -- In Aberdeen, a city built out of granite on Scotland’s North Sea coast, a diamond merchant checks the price of oil every day.
Until recently, the dealer, Oscar Ozdaslar, had been accustomed to North Sea oil workers stopping in to buy 3,500-pound ($5,260) diamond rings and earrings in his store on Union Street.
“This Christmas was very quiet compared to the Christmas before,” said Ozdaslar, 50. “The oil guys didn’t come in.”
Just six months ago, Aberdeen was the economic linchpin of Scotland’s campaign to split from the U.K. as oil traded above $100 a barrel. In the wake of the independence referendum’s failure, it serves as a microcosm of how crude’s slump to nearer $50 is hurting cities from Calgary to Kuala Lumpur.
“Aberdeen has been the focus of a classic oil boom,” said Gordon Hughes, a professor of economics in the University of Edinburgh and a former energy adviser to the World Bank. “There’s no doubt that the city will go through a bad period now that it’s over.”
What’s more, the North Sea basin is among the most expensive in the world from which to extract oil. About 20 percent of U.K. production is “uneconomic” at $50 a barrel, trade group Oil & Gas U.K. says.
1980s Feel
BP Plc Chief Executive Officer Bob Dudley said this week it feels like the 1980s when he was living in Aberdeen working as an artificial lift engineer for Amoco before it merged with BP. Prices fell about 70 percent in a few months after Saudi Arabia increased production and didn’t recover until 1990.
Regions worldwide that depend on the industry are having an “enormous shock,” he said in an interview with Bloomberg Television.
At Cafe Boheme, a French restaurant across the street from Ozdaslar’s jewelry store, customers including Royal Dutch Shell Plc canceled about 30 Christmas bookings in December, said Dominique Mancellon, who owns and runs the eatery.
Staff from companies including Shell, Statoil ASA and Petrofac Ltd. make up about half of his customers. Sales will fall about 10 percent for the 12 months through July after increasing every year in the past decade, he said.
“If the price of oil stays down, we’ll have to be very careful about how we run our business,” said Mancellon, 56, as he prepared cheese plates and glasses of white wine.
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