Norway could lose two-thirds of its oil wealth
If today’s current low oil prices don’t rise again, two thirds of Norway’s estimated oil wealth will disappear, a new analysis shows.
Based on Finance Ministry calculations and Finance Minister Siv Jensen’s estimation in autumn that the value of oil not yet extracted constitutes 4,200 billion kroner, 3,750 billion of which belongs to the state, an analysis from Dagens Næringsliv shows that two thirds of that wealth will disappear if oil prices remain at today’s low level.
This means that the value of Norway’s oil wealth will fall from 4.2 trillion kroner to 2.5 trillion.
Last week the price of North Sea oil fell below $30 per barrel. By comparison, the price was at $110 in the summer of 2014.
Processor Ragnar Torvik from the Norwegian University of Science and Technology (NTNU) said that the price change corresponds to a significant amount for each individual Norwegian.
“Capital reduction in the public sector is at 2,429 billion, which is 500,000 kroner per resident or two million for a family of four. That illustrates who much the fall in the price of oil reduces wealth,” he said.
Citing the considerable amount of uncertainty in these types of long-term estimates, State Secretary Paal Bjørnestad declined to comment on the analysis in detail but said that there Norway will undoubtedly feel the effects of lower oil prices.
“There is little doubt that sustained lower oil prices will eventually have consequences; we will be less rich than we thought. This of course means that we will be putting smaller earnings into the fund and the growth in our expected real return will be smaller,” he said.