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Sunday, July 14, 2024

Few aware of oil revenue rule

Norway’s so-called “handlingsregelen,” the rule that limits use of oil revenues, may well be the most important monetary regulation in the county. Few Norwegians, it seems, are actually familiar with it.

Norway restricts the spending of its oil wealth through the rule known as "handlingsregelen." PHOTO: Statoil/Øyvind Hagen

A new survey, conducted by research firm Respons Analyse for newspaper Aftenposten, indicates that fully 73 percent of the Norwegian population were not familiar with the rule. Only 20 percent could respond that handlingsregelen dictated how much of the returns from the country’s oil fund could be used in the state budget. Only another 6 percent knew that handlingsregelen “had something to do” with the oil fund and/or the state budget.

Researchers and politicians were surprised over the lack of public knowledge of something that regularly figures into the public debate in Norway. Election researcher Hanne Marthe Narud, a professor of political science at the University of Oslo, told Aftenposten she expected that more would have known what it’s all about since “there has been so much talk about it and there has been so much debate in the newspapers about it.”

The rule itself limits the amount of oil revenues that can be spent every year to just 4 percent of the size of Norway’s sovereign wealth (oil) fund, also known as Statens pensjonsfond utland or the Norwegian Government Pension Fund Global. The fund, now the second-largest of its kind in the world, was set up in the 1990s to save oil revenues for future generations and prevent too much money from flowing into the Norwegian economy and setting off inflation.

The political goal is for Norway to maintain its oil wealth in perpetuity, long after North Sea wells may run dry, by only using an average of returns from the oil fund and not dipping into the fund itself. The “real returns” of the fund over time have been calculated at 4 percent, hence the 4-percent-handlingsregelen.

The ongoing political debate, however, erupts when money is needed for new roads, schools, rail systems, hospitals and other public projects and services in Norway. That’s when many claim that a wealthy country like Norway should be able to afford top-notch infrastructure because of its oil wealth. The Progress Party, Norway’s most conservative, has long advocated using much more of the country’s revenues than has been used so far, while the more left-leaning parties try to keep firm limits on oil fund use and spending.

When the finance crisis erupted in 2008, however, Norway’s left-center government quickly bent the rule and used more of the oil revenues than the 4-percent rule dictated, to relieve any ill effects of the credit crunch. Now the government has signaled that oil revenue use will once again be restricted, despite the cries for more funding for highways and trains.

Finance Minister Sigbjørn Johnsen of the Labour Party claimed he thinks most Norwegians are at least vaguely aware of the rule despite the poll results. “I think our message has gotten through, that we shall use the fund’s returns and not the fund itself, and that we can use less in good economic times and more in bad times,” Johnsen told Aftenposten. “As long as we get support for the main purpose of the rule, I’m not worried.”

Views and News from Norway/Nina Berglund
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