Port Ellen on the island of Islay, just off Scotland's west coast, would seem an unlikely twin for a village in Burgundy or the Loire. The latter are likely to have considerable wealth based on their ancient vineyards, while the former is a rugged – albeit beautiful – fishing village with a couple of pubs, a few shops and an Indian restaurant.

However, a common trait now links these places: both lend their names to extraordinarily expensive drinks. Wines from Gevrey-Chambertin or Pouilly-sur-Loire can sell for eye-watering prices; now Port Ellen is to join this elite club of beverage makers. The drinks conglomerate Diageo will this week release 2,950 bottles of Port Ellen whisky – at £1,500 a bottle. Within days, many will be offered on eBay at twicethat price – not bad for a whisky that sold for £30 two decades ago. "Port Ellen's price has soared for a straightforward reason," says Diageo's Nick Morgan. "We don't make it any more. Its scarcity is the driver."

And that is the extraordinary aspect of the Port Ellen story. Its distillery was closed in 1983 because demand for whisky was plummeting. Today the industry is struggling to meet demand. New distilleries are being built, warehouses expanded and imports of barley – whisky's prime ingredient – have soared. Scottish whisky's fortunes have been transformed, with considerable political ramifications. The story of Port Ellen, therefore, has key implications.

In the late 1950s, regulations controlling whisky manufacture were changed and distilleries made big improvements in output, creating a glut in a market