Record oil prices have not only swelled Treasury coffers but have also been seized upon by Alex Salmond to demand that Scotland receives a share of the windfall to boost public expenditure north of the border.

Record oil prices have not only swelled Treasury coffers but have also been seized upon by Alex Salmond to demand that Scotland receives a share of the windfall to boost public expenditure north of the border. The refrain echoes the "It's Scotland's Oil" campaigns of the past. In government at Holyrood, the SNP has turned up the volume on the musical line against a political as well as an economic backdrop. There is the possibility of a referendum on independence in 2010, while an alternative means of funding Scotland's public expenditure might well emerge from the Calman Commission, established by the Unionist parties.

Scotland's future funding model seems up for grabs, even within the Union. The SNP maintains that, under independence, the fiscal deficit would be manageable if the government in Edinburgh received its geographical share of North Sea oil and gas revenues. According to the latest Scottish Government's Expenditure and Revenue Statement (Gers), the deficit for 2006-7 would have been £2.7bn, down from £10.2bn without these revenues. Despite oil and gas production having peaked, soaring crude prices suggest an independent Scottish Government's books would be healthier.

That would seem to be good news for the First Minister and his MSPs. But this is a fiendishly complex matter that demands clarity and candour from ministers in what might be a crucial period for Scotland's future governance. In this regard, a paper published yesterday by the Centre for Public Policy for Regions (CPPR), a joint initiative involving Glasgow and Strathclyde universities, could hardly have appeared at a more opportune time. In common with other recent studies, the CPPR paper gives a reminder that reports of the demise of the North Sea are greatly exaggerated.

Total tax take from the sector is forecast to be nearly £10bn in the current financial year, a figure achieved only twice in nearly a quarter of a century. Even then, the forecast is based on a price significantly lower than already achieved this year. Add an estimate from experts that Scotland's geographical share of North Sea tax revenues could rise to 90% of the total within five years and it is easy to imagine Mr Salmond champing at the bit to get his hands on the oil to bolster the case for independence and meet the cost of all of the country's future needs.

The paper correctly cautions against an automatic envisioning of Scotland as a land of milk, honey and flowing oil revenues. As it points out, these revenues are very difficult to predict. They are contingent on future crude prices; capital and operating costs (too high to date for west of Shetland); production rates; tax regimes; and the location of reserves. Anyone who could accurately predict what these will be in the future would never have to work again. Given uncertainties in the very area earmarked for a pivotal role in Scotland's future funding by the SNP (North Sea revenues), caution should be the watchword. The most recent figures still show a fiscal deficit. If the SNP were to go ahead with its oil fund proposal for meeting the cost of future projects, paid for from North Sea revenues, the gap would remain and it might be bigger. Just how would Mr Salmond square the budget in an independent Scotland given the imponderables, which include the size, role and funding of the oil fund?