Norwegian Oil Boom or Burden - Add-on (Counts as 7+)

            Most people would love to have the dilemma facing the Norwegian government. So much money it doesn’t know what to do with it.  Since discovering oil in the North Sea in 1969, Norway has resisted spending all its profits frivolously. Instead in 1990 the Norwegian government decided to invest the oil profits into a sovereign wealth fund, known as the Government Pension Fund Global.  This fund specifically insures that all Norwegians have a pension waiting for them after they retire at the age of 67 years old. The good news, since Norway only has a population of a little over 5 million people each one of them is technically a millionaire as the fund “reached 5.11 trillion crowns, or ($931.87 billion).” (“Price”) Norwegians conservative government has much to consider as many think diversifying the current windfall into a few smaller funds might be advantageous.

            Since Norway seems to have much wealth to spare, this makes it an example to the rest of Europe that is struggling with large amounts of debt. Many of its European neighbors want to borrow money from the fiscally conservative nation. However Norway addresses this issue by investing the money from the fund abroad, instead of lending to other countries. This profits the Norwegians with wise investments and helps its neighbors to promote growth within their own countries’ economies, a win-win for both. Another side effect is that the Norwegian “oil wealth may have made the state reluctant to make reforms.” (“Norwegians”) Norwegian dairy farmers feel the emphasis on oil wealth has undermined the importance of their way of life.  Being so close to the Artic, it is necessary to keep the cows in heated barns and provide subsidies for farmers during harsh winters. Many of these benefits have been hard to come by as the government’s emphasis has switched to foreign investments and fiscal conservatism.  Another down side seems to be that Norwegians have seen a slide in the unemployment rate and a new reluctance to work, "One in five people of working age receives some kind of social insurance instead of working.” (“Norwegians”) While oil has certainly made the Norwegians richer, one wonders if all this new found wealth will degrade at a traditional hard working people.

            However for now the oil reserves in Norway do not appear to be running out as the 7th largest exporter of oil in the world. Their fund is still going strong with wise investments, “Profits and taxes from the oil and gas industry give the government oil fund $1 billion a week.” (“Price”) It is estimated that by the year 2020, the fund’s worth will be over $1 trillion dollars.  By investing the oil profits in non-oil funds the Norwegian Government Pension Fund Global managers ride out turbulence in the global market with a peace of mind knowing diversity is the key.  However, Norwegians know that someday the oil reserves will run out, but that is part of their plan, “Their mission, by government mandate, is slowly and carefully to build up wealth to help fund this country long after the oil and gas reserves run out.” (“Norwegians”) In the meantime, other nations have used the Norwegian fund as an example to set up their own sovereign funds, such as United Emirates and Dubai.  These countries need to approach their wealth with caution as well.  With great wealth come great responsibilities, for their governments through the investments they make, and the impact on its people.

Norwegian Oil rig that has made all Norwegians millionaires

Bibliography

Price, Matthew. "Norway: Is World's Largest Sovereign Wealth Fund Too Big?" BBC News. BBC, 09 Dec. 2013. Web. 13 Jan. 2014. <http://www.bbc.co.uk/news/world-europe-24049876>.

"Norwegians Become Crown Millionaires as Sovereign Wealth Fund Hits Benchmark." ABC News. ABC, 9 Jan. 2014. Web. 13 Jan. 2014. <http://www.abc.net.au/news/2014-01-09/all-norwegians-become-millionaire-shareholders-in-world27s-big/5191480>.