Assessing the impact of oil on the Norwegian economy

Résumé du document

Describing Norway as a wealthy nation almost comes close to using a truism. In terms of Gross Domestic Product per capita, Norway was the 19th richest country in the world in the seventies, and is now ranked second among worldwide, just after Luxembourg. (Halvorsen & Sterno 2008 :28). The picture of Norway as a booming economy is rather new and it should not be forgotten that, there is plethora of natural resources such as minerals, timber, iron, fish stocks, or whales, Norway was in the 19th century, a rather poor and undeveloped country, even described as “ a backward country in the European Periphery ” (Maagero & Simonsen 2008 : 56).

Norway has been through two industrialization's in the 19th century. Although late compared to the other Scandinavian countries, they triggered a transition phase and turned Norway into a developed nation. Indeed, the discovery of the benefits of hydroelectric power during the second industrialization - leading to the development of the electrochemical and metallurgical industry- coupled with the exportation of semi-finished products (Maagero & Simonsen 2008: 65) have been key elements for the Norwegian economic growth. Norway was then fully integrated in the western industrialized world when huge reserves of oil and gas were found in 1969 in the North Sea, and it can be asserted that the discovery of oil has had a crucial impact on the Norwegian economy. Therefore, how has the oil influenced the Norwegian economy? How assessing the impact of such a discovery on the Norwegian economy?

The production of oil – since the beginning of the seventies has undeniably generated a rapid economic growth. According to an economic survey of Norway from 2007, in three decades, Norway has become nothing less than the 8th biggest producer and the 3rd largest exporter of oil in the world (OECD, 2007). What is more, Norway is exporting more than 90% of its total oil exploitation (respectively 3,1 million barrels a day) – (OECD, 2007) and covers today 10% of the European consumption. The production of oil has then strongly contributed to the opening-up of the Norwegian economy by reinforcing its strategic and crucial position in the international trade.

Extraits

[...] What is more, thanks to the pension fund, Norway is a country that records a nonexistent debt. Without the oil revenues, Norway state budget would actually have a deficit reaching NOK 36.4 billion (Halvorsen & Sternø 2008 : 30). The main purpose of the petroleum fund is to ensure on the long view the inter-generational responsibility (Valborg Lie 2010) - in other words make sure that the future generation will benefit from the oil revenues. There are also two other important objectives. [...]

[...] How assessing the impact of such a discovery on the Norwegian economy? The production of oil since the beginning of the seventies has undeniably generated a rapid economic growth. According to an economic survey of Norway from 2007, in three decades, Norway has become nothing less than the 8th biggest producer and the 3rd largest exporter of oil in the world (OECD, 2007). What is more, Norway is exporting more than 90% of its total oil exploitation (respectively 3,1 million barrels a day) (OECD, 2007) and covers today 10% of the European consumption. [...]

[...] Assessing the impact of oil on the Norwegian economy Describing Norway as a wealthy nation almost comes close to using a truism. In terms of Gross Domestic Product per capita, Norway was the 19th richest country in the world in the seventies, and is now ranked second among worldwide, just after Luxembourg. (Halvorsen & Sternø 2008 :28). The picture of Norway as a booming economy is rather new and it should not be forgotten that, although the plethora of natural resources such as minerals, timber, iron, fish stocks, or whales, Norway was in the 19th century, a rather poor and undeveloped country, even described as a backward country in the European Periphery (Maagerø & Simonsen 2008 : 56). [...]

[...] meld. nr 2010-2011 Nasjonalbudsjettet http://www.regjeringen.no/en/dep/fin/press-center/Press- releases/2010/Revised-National-Budget-2010.html?id=604521 OECD Economic survey of Norway 2007: The petroleum sector and its impact. Paris OECD Economic Survey: Norway. Paris Valborg Lie , Special adviser, Norwegain Ministry of finance (2010) Statens pensjonsfond (Oljefondet) & ethical challenges. [...]

[...] Norway is then highly sensitive to the variation of international oil prices (Maagerø & Simonsen 2008: 72). Oil and gas accounts for about 50% of its exportations (OECD 2010), and in 2008 the oil rent accounted for 18% of the GDP. A significant decrease in international oil prices would then obviously hit Norwegian economy. It must also be noticed that oil prices are calculated in US dollars, and a decrease in the value of the currency would have repercussions on the Norwegian economy (Halvorsen & Sternø 2008: 39). [...]