Abstract
The uncertainties are many when forecasts are made for the Norwegian economy. However it is rather certain that activities related to the petroleum production will fall. That we already have passed the oil production peak is also fairly certain. It is not so clear whether or not we have passed the investment peak. From Eika et al. (2010) we know that downscaling of the petroleum sector will affect many people and firms, and most sectors of the economy are influenced by production of oil and the spending of oil revenues either directly or indirectly. The challenges that the Norwegian economy will confront when the activity from the petroleum sector is reduced, will however not only depend on the demand from the petroleum sector. The demographic development, the growth of the Government Pension Fund Global and the development of the world economy are all important factors that will affect the future of for the Norwegian economy. To illustrate future challenges for the Norwegian economy in the period to 2030, we present forecasts for the economy. The Norwegian petroleum directorate (NPD) has presented forecasts for petroleum production that is the basis for both our baseline and alternative scenario. We assume also that
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Citation Formats
Cappelen, Aadne, Eika, Torbjoern, and Prestmo, Joakim.
The reduction of petroleum operations. How big are the challenges for the Norwegian economy?; Nedbyggingen av petroleumsvirksomheten. Hvor store blir utfordringene for norsk oekonomi?.
Norway: N. p.,
2010.
Web.
Cappelen, Aadne, Eika, Torbjoern, & Prestmo, Joakim.
The reduction of petroleum operations. How big are the challenges for the Norwegian economy?; Nedbyggingen av petroleumsvirksomheten. Hvor store blir utfordringene for norsk oekonomi?.
Norway.
Cappelen, Aadne, Eika, Torbjoern, and Prestmo, Joakim.
2010.
"The reduction of petroleum operations. How big are the challenges for the Norwegian economy?; Nedbyggingen av petroleumsvirksomheten. Hvor store blir utfordringene for norsk oekonomi?"
Norway.
@misc{etde_1009196,
title = {The reduction of petroleum operations. How big are the challenges for the Norwegian economy?; Nedbyggingen av petroleumsvirksomheten. Hvor store blir utfordringene for norsk oekonomi?}
author = {Cappelen, Aadne, Eika, Torbjoern, and Prestmo, Joakim}
abstractNote = {The uncertainties are many when forecasts are made for the Norwegian economy. However it is rather certain that activities related to the petroleum production will fall. That we already have passed the oil production peak is also fairly certain. It is not so clear whether or not we have passed the investment peak. From Eika et al. (2010) we know that downscaling of the petroleum sector will affect many people and firms, and most sectors of the economy are influenced by production of oil and the spending of oil revenues either directly or indirectly. The challenges that the Norwegian economy will confront when the activity from the petroleum sector is reduced, will however not only depend on the demand from the petroleum sector. The demographic development, the growth of the Government Pension Fund Global and the development of the world economy are all important factors that will affect the future of for the Norwegian economy. To illustrate future challenges for the Norwegian economy in the period to 2030, we present forecasts for the economy. The Norwegian petroleum directorate (NPD) has presented forecasts for petroleum production that is the basis for both our baseline and alternative scenario. We assume also that current policy rules will be continued. Our projections for the Norwegian economy show a development the next twenty years where Norway keeps building financial assets abroad and the petroleum sector reduces its importance for the Norwegian economy considerably. The contribution both to GDP and total demand will be more than halved the next twenty years. Pursuant to our calculations this will not create large macroeconomic challenges for the Norwegian economy. Even if the petroleum production should be further reduced because undiscovered resources that NPD expects to be explored, not will be produced, the consequences of the shocks to the economy can be handled. An important reason for this can be explained by how the fiscal policy rule and the inflation target stabilize the economy and will dampen new shocks from the petroleum sector. Another reason why the macroeconomic consequences can be tackled is the demographic changes and aging of the population. These changes will make it difficult to continue the rapid growth in production and employment that the Norwegian economy has experienced since the early 90'ies. If the downscaling of the petroleum sector were not to happen, we find that the pressure on the Norwegian economy will be more difficult to handle due to the demographic changes. In the public discussion one question is often raised: 'What will Norway live of after oil?' Economists answer that we shall be working. As long as we adapt to changes such that most of us keep on working and develop our skills, we will be able to sustain growth in per capita consumption. Although we currently do produce petroleum with high return, most of the revenues are saved and we are not dependent on oil revenues today. Those living from oil production are employees in oil companies, but they just work as the rest of us. Norway has capital income from accumulated economic rent based on petroleum production, and it gives us a higher national income. But this income equals only two years of normal economic growth or two man-weeks of production annually. Our analysis show that the accumulated economic rents will double by 2030, but even in 2030 most of our national income will depend on standard factors of production, not oil. The problem of how to survive without oil revenues is therefore due to a misunderstanding of the current economic situation. Today as well as in the future, our capability to exploit available labour is vital for our wealth. (Author)}
place = {Norway}
year = {2010}
month = {Nov}
}
title = {The reduction of petroleum operations. How big are the challenges for the Norwegian economy?; Nedbyggingen av petroleumsvirksomheten. Hvor store blir utfordringene for norsk oekonomi?}
author = {Cappelen, Aadne, Eika, Torbjoern, and Prestmo, Joakim}
abstractNote = {The uncertainties are many when forecasts are made for the Norwegian economy. However it is rather certain that activities related to the petroleum production will fall. That we already have passed the oil production peak is also fairly certain. It is not so clear whether or not we have passed the investment peak. From Eika et al. (2010) we know that downscaling of the petroleum sector will affect many people and firms, and most sectors of the economy are influenced by production of oil and the spending of oil revenues either directly or indirectly. The challenges that the Norwegian economy will confront when the activity from the petroleum sector is reduced, will however not only depend on the demand from the petroleum sector. The demographic development, the growth of the Government Pension Fund Global and the development of the world economy are all important factors that will affect the future of for the Norwegian economy. To illustrate future challenges for the Norwegian economy in the period to 2030, we present forecasts for the economy. The Norwegian petroleum directorate (NPD) has presented forecasts for petroleum production that is the basis for both our baseline and alternative scenario. We assume also that current policy rules will be continued. Our projections for the Norwegian economy show a development the next twenty years where Norway keeps building financial assets abroad and the petroleum sector reduces its importance for the Norwegian economy considerably. The contribution both to GDP and total demand will be more than halved the next twenty years. Pursuant to our calculations this will not create large macroeconomic challenges for the Norwegian economy. Even if the petroleum production should be further reduced because undiscovered resources that NPD expects to be explored, not will be produced, the consequences of the shocks to the economy can be handled. An important reason for this can be explained by how the fiscal policy rule and the inflation target stabilize the economy and will dampen new shocks from the petroleum sector. Another reason why the macroeconomic consequences can be tackled is the demographic changes and aging of the population. These changes will make it difficult to continue the rapid growth in production and employment that the Norwegian economy has experienced since the early 90'ies. If the downscaling of the petroleum sector were not to happen, we find that the pressure on the Norwegian economy will be more difficult to handle due to the demographic changes. In the public discussion one question is often raised: 'What will Norway live of after oil?' Economists answer that we shall be working. As long as we adapt to changes such that most of us keep on working and develop our skills, we will be able to sustain growth in per capita consumption. Although we currently do produce petroleum with high return, most of the revenues are saved and we are not dependent on oil revenues today. Those living from oil production are employees in oil companies, but they just work as the rest of us. Norway has capital income from accumulated economic rent based on petroleum production, and it gives us a higher national income. But this income equals only two years of normal economic growth or two man-weeks of production annually. Our analysis show that the accumulated economic rents will double by 2030, but even in 2030 most of our national income will depend on standard factors of production, not oil. The problem of how to survive without oil revenues is therefore due to a misunderstanding of the current economic situation. Today as well as in the future, our capability to exploit available labour is vital for our wealth. (Author)}
place = {Norway}
year = {2010}
month = {Nov}
}