Just as Norway’s elite were gathering on Thursday to celebrate the 5oth anniversary of the country’s oil industry comes warnings of a new oil price “collapse” that could spoil the party. Analysts fear oil prices will dive once again if the OPEC cartel doesn’t agree to cut production, while calls are also going out to cut production in Norway, for climate and environmental reasons.
“Right now things are looking a bit gloomy,” Thina Saltvedt, oil analyst for Nordea in Norway, said on national radio Thursday morning. She told Norwegian Broadcasting (NRK) that major disagreement within OPEC means “we can see the oil price collapse” again.
Jarand Rystad, another oil analyst who heads the leading analysis firm Rystad Engery in Oslo, agreed. “If there’s no agreement (among OPEC members), it will immediately lead to a new fall in the oil price,” he told NRK.
Members of OPEC (the Organization of Petroleum Exporting Countries) are due to meet later this month to debate production levels. Saltvedt has repeatedly noted how the “world is awash in oil” at a time when demand is lower than supply. That drives down prices, which already have dipped once again to well below USD 50 a barrel.
“On the Norwegian Continental Shelf, we need an oil price of around USD 60 a barrel in order for most projects to be profitable,” Saltvedt said. “We’re not there today. The Norwegian economy depends on the oil price, so does the Norwegian krone. If there’s no agreement (to cut OPEC production) it will mean even bigger challenges for the oil industry.”
Norway’s krone has strengthened a bit recently after the central bank left interest rates steady and after oil prices rose after first falling below USD 50. On Thursday morning it cost NOK 8.18 to buy one US dollar, but it can quickly cost more if oil prices fall again.
Big party at City Hall in Oslo
The gloomy outlook was announced just as Prime Minister Erna Solberg was about to host a banquet inside the Oslo City Hall Thursday evening to celebrate the golden anniversary of the first oil and gas activity in Norwegian waters. Around 400 guests including top politicians, party leaders, diplomats and even King Harald V were gathering with the notable exception of Liberals leader Trine Skei Grande. She declined the invitation last month at a time when her party is urging cutbacks in Norwegian oil exploration and production for environmental and climate reasons.
“It is worth celebrating that we found oil,” Grande told news bureau NTB, “but I don’t quite know what there is to celebrate now.” She’s been demanding a much “greener” state budget than the one Solberg’s government has proposed, and Norway already has been caught in an economic slowdown since oil prices first dove in 2014.
Other parties, most notably the Greens, are also calling for oil production cutbacks and even a halt to all new oil and gas exploration, especially in the Arctic. The Greens’ sole Member of Parliament, Rasmus Hansson, accepted the invitation to Thursday’s party anyway.
Gearing for a ‘future without oil’
The party was also being held just days after Solberg’s government received an expert commission’s report about how to make Norway more competitive in a “greener” economy. “We’re already seeing signs of a future without oil and gas,” concluded the commission that was headed by the EU’s former climate commissioner Connie Hedegaard and the head of the finance industry’s trade association Idar Kreutzer. That future, the commission claimed, will be characterized by competitive prices for renewable energy and electrified modes of transportation.
Others have claimed that Norway will never meet its climate goals, which require major cuts in carbon emissions, unless the country pares back its oil industry. Even the head of Norway’s national employers’ organization NHO told newspaper VG last week that all the various state budget proposals that involve heavier taxes and fees aimed at cutting emissions won’t be enough.
“What’s so difficult in the entire debate (over how to make Norway greener) is that we are so dependent on oil,” NHO chief Kristin Skogen Lund told VG. “The (oil) critics underestimate the consequences of what will happen when Norway makes itself less dependent on oil. It’s easy to talk about the need for omstilling (restructuring the economy away from oil dependency), but much more difficult to carry out.”