Norwegian analysts, business executives, economists and politicians are suddenly seeing an upside to the recent fall in oil prices. As the country heads into the New Year, many are already adapting and even singing the praises of a steep decline in the value of what made Norway rich.
“For Norway, I think we’ve reached the revenue peak (from oil),” Thina Saltvedt, oil analyst at Nordea Markets, told newspaper Dagsavisen. She suggested, however, that the sudden, even shocking, decline in oil revenues can be good for the Norwegian economy in the long run because it will fuel more diversification.
“When (the economy) isn’t booming anymore, we have to find something else to lean on,” Saltvedt noted. In that sense, the rapid decline in oil revenues flowing into state coffers and pumping up the rest of the economy is already forcing politicians into making economic diversification a greater priority.
Saltvedt, who has been critical of the conservative minority government coalition’s approach to climate issues, also thinks the sharply lower oil price came at the right time. “It’s easier to push through new climate measures when we see a fall in oil prices,” she reasons. With less money coming from oil, more efforts can be made to develop alternative energy projects.
“One thing is to cut emissions, but we must also build up green industry that can create economic growth,” she said. “We can use a lot of the technology and competence from the oil and gas sector to built up a green cluster. We have to dare to think big, like we did when we built up the oil industry. It seems like (Energy Minister Tine) Sundtoft wants to do that.”
Many environmentalists have already welcomed lower oil prices as good news for the climate, since expensive offshore exploration and development of new fields likely won’t be profitable at current cost levels. At the same time, the formerly record high oil prices prompted new investments in public transportation and energy efficiency. “That pressure won’t be there any longer, but I think the development is non-reversible,” Saltvedt said. “Folks won’t stop buying energy-efficient cars because gasoline has become a bit cheaper.”
Price predictions: USD 62-70 per barrel
The rapid decline in oil prices stabilized just before the Christmas holidays, and North Sea crude was still trading just above USD 60 a barrel on Monday. Saltvedt thinks prices will average USD 62 per barrel in 2015, while fellow analyst Torbjørn Kjos at DNB Markets predicts an average price of USD 70 as does Jan Adreassen, chief economist at the savings bank alliance Eika.
As oil prices edged up from levels below USD 60 earlier in December, the main index of the Oslo Stock Exchange also rose and share prices were up slightly on Monday. The value of the Norwegian krone rose a bit just before Christmas as well, but was trading down against the US dollar this week. The decline of the long-strong krone, however, has been welcomed by exporters not least in such major industries as seafood (second only to oil in Norway) and timber.
‘Most jobs secure’
Saltvedt isn’t the only one looking on the bright side of lower oil prices. A panel of experts assembled by newspaper Dagens Næringsliv (DN) just before the holiday also made it clear that they see no cause for economic alarm and instead think a lower oil price can do Norway good. They included Kristin Skogen Lund, head of the national employers organization NHO, Norwegian Air chief Bjørn Kjos and the head of the Norwegian Labour Party Jonas Gahr Støre, who found himself agreeing with statements made earlier by Finance Minister Siv Jensen of the Progress Party and by local economists that the dive in oil prices “is no crisis.” Støre, like Saltvedt, also points to climate gains and opportunities to transfer oil industry expertise to other sectors.
DNB boss Rune Bjerke, a hot candidate to take over as new chief executive of Statoil after Helge Lund, further believes that most jobs in the oil sector are secure, despite recent layoffs and fears of more. He has a historical perspective behind his basic agreement that Norway’s economy is not heading into crisis because of an oil price around USD 60.
“I was a political adviser in the Oil & Energy Ministry in 1986, when the oil price was USD 12,” Bjerke told newspaper Aftenposten. “I sat on the board of Statoil in 1998 when it was around USD 20, and I was DNB’s chief executive when it fell under USD 50 in 2009. I’ve been through these huge swings and it’s important that pessimism doesn’t get greater than what the basis is for it. It’s incredibly important to be reminded that folks’ real disposable income will also rise next year, and that the majority of jobs are secure.”