AN industry which supports thousands of North-East jobs is "close to collapse" because of plummeting oil prices, according to experts.

Cheaper oil is expected to see petrol prices drop below the £1 a litre mark in the new year, but the offshore exploration industry is facing a crisis, said Robin Allan, a director of Premier Oil and chairman of the independent explorers' association Brindex.

He warned it is "almost impossible to make money" with the oil price below 60 US dollars (£38) a barrel. Mr Allan said there will be no new investments until prices start rising.

But accountants PricewaterhouseCoopers (PwC) said the falling oil price should be a net benefit to the economy as a whole, even if there is some losers in the UK oil and gas sector.

While the oil price has fallen, gas prices remain relatively favourable and provide big opportunities for investment, North Sea-focused company Independent Oil and Gas Plc said yesterday.

But Mr Allan, outlined the scale of the problem, when he said: "It's a huge crisis. This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that's painful for our staff, painful for companies and painful for the country.

"It's close to collapse. In terms of new investments - there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks.

"Budgets for 2015 are being cut by everyone."

Oil veteran Sir Ian Wood last week predicted job losses in the North Sea over the next 18 months as the company he founded, the Wood Group, announced a pay freeze and a cut in contractor rates.

ConocoPhillips is cutting 230 out of 1,650 jobs in the UK, Goldman Sachs predicted big oil firms would have to slash capital expenditure by 30 per cent to restore their profitability and Schlumberger cut back its UK-based fleet of geological survey ships.

The oil and gas sector supports 65,000 jobs in this region, the North East Chamber of Commerce estimates, with North-East offshore skills in demand around the globe. In addition, the sector is key to regional infrastructure, such as daily flights from Durham Tees Valley to Aberdeen which are used by oil and gas workers.

George Rafferty, the chief executive of North-East industry body NOF Energy, was more upbeat, and believed the wide range of transferable North-East skills would protect jobs.

"The supply chain is experienced at operating within a fluctuating industry and, although the present situation is particularly challenging, it does present opportunities for companies that have the ability to deliver agile and innovative services that can meet the current scale and requirements of the North Sea," he said.

PwC chief economist John Hawksworth said: "In essence, an oil price fall acts like a tax cut for the economy, but a particularly favourable one in the sense that the burden of lost revenue is primarily borne by the major oil producers such as the Opec member countries and Russia.

"Of course, the UK is still a significant oil producer, but we are now a net oil importer, so there should be a net benefit to our economy as a whole, even if there as some losers in the UK oil and gas sector (and in particular places like Aberdeen).

"As an illustration, in our shale oil report from February 2013, we estimated that a 50 US dollars (£32) fall in the oil price, if sustained, could lead to the level of UK GDP being around 3 per cent higher in the long run."

UK consumers are already reaping the benefits with falling inflation pushing up spending power, providing a knock-on effect for suppliers of consumer goods, he said.