Predicting oil price movements is as risky as exploring for oil itself.

The sharp price drop has inevitably had implications for the UK.

Even before the oil price crashed, the UK industry was at a crossroads. Its future was the subject of proposals in a report last February by industry veteran Sir Ian Wood, the UKCS [UK continental shelf] Maximising Recovery Review, commissioned by the UK Government.

It was a blueprint for maximising the level of petroleum that can be extracted from the region. Its recommendations included setting up a new oil and gas regulator, closer collaboration between government and industry, developing fields in groups rather than individually to maximise their value and investing to prolong the life of existing infrastructure.

The report stated: "The review believes that urgent and full implementation of the recommendations will have the potential to deliver, at the low end, an additional 3-4 billion boe [barrels of oil equivalent] over the next 20 years, worth approximately £200 billion to the UK's economy at today's prices."

Presumably this £200bn boost might be revised drastically downwards, as that was based on an oil price of $109.76 per barrel and not a price around the current $50 mark. Recommendations for saving the industry when oil prices are riding high need to be revised as a matter of urgency when they fall.

The Government intends to implement Wood in full. Mr Osborne and Danny Alexander, Chief Secretary to the Treasury, also announced various measures around December's Autumn Statement mainly aimed at implementing other parts of Wood. These included introducing a new "cluster area" allowance to encourage companies to explore areas surrounding individual fields and grants to fund seismic exploration in under-explored areas. The supplementary tax on profits that oil companies pay on top of corporation tax was cut from 32 per cent to 30 per cent.

With the oil price falling so sharply, the Chancellor needs to be seen to act decisively and not merely tinker at the edges of the tax system. In the 2011 budget, Mr Osborne raised the supplementary tax rate from 20 per cent to 32 per cent, using the justification that oil prices had almost doubled.

Now that oil prices have halved in the past six months, this logic indicates that that 12-point hike needs to be reversed immediately. Arguably the oil industry should be put on an equal footing with other industries and the supplementary tax should be removed.

Then there is petroleum revenue tax (PRT). It is an additional 50 per cent tax on petroleum extraction profits levied on fields given development consent before March 1993. It should be scrapped as its revenue-raising power is minimal, presumably because oil companies have cut back on their activities in fields that incur PRT.

It appears it will take the Department of Energy until well into 2016 to fully set up the infrastructure to bring about the efficiency gains the Wood review envisages. That delay is potentially a death blow to the success of the new initiative.

Then there is the question of the industry sharing technology and working co-operatively in the way the review suggested. The industry's appetite for this may have been genuine a year ago, but the 50 per cent fall in oil prices may make the predatory nature of oil companies more evident than the backslapping scout-jamboree gathering of before.

The 45 per cent increase in North Sea operating costs over the past three years plus the decline in easily accessible reserves make the North Sea less attractive to invest in than other areas of the world.

The industry needs to look at its cost structure. Should it only be contractors who should bear the pain of salary cuts? Can the North Sea oil industry afford the high salaries it has been paying? The oil price drop is a signal that the Government needs to redouble its efforts at reform and go much further than Wood. We cannot see why the industry would continue to invest in the North Sea without additional incentives. The future of the industry is on a precipice. The good old days have gone, and they won't be coming back.