The petroleum sector employs only a small part of the total labour force, but brings in substantial revenues. A main question for Norwegian economic policy is therefore how to stabilise the Norwegian economy in the face of high, fluctuating revenues from the petroleum sector. 3. The importance of the petroleum sector  Some figures will illustrate the importance of the petroleum sector in the Norwegian economy. Oil production started in the 1970s and has gradually increased. Given the current estimates for existing resources, production is expected to be at its maximum level between the years 2000 and 2010, and then decrease gradually as the remaining resources are reduced. The level of future oil production is highly uncertain. Employment in the petroleum sector and related industries is only around 4% of total employment. Investment in the petroleum sector has been substantial compared to investment in the rest of the economy, and as a share of GDP. Investment has an import share of about 1/3, which means that investment relating to the petroleum sector has had a substantial effect on industries in mainland Norway. The income from petroleum extraction is of substantial significance to the Norwegian economy and to the public sector in particular. In the 1990s the export value of oil has been around 1/3 of total exports excluding ships and oil rigs. The petroleum sector is an important source of revenues for the government, both through taxes and through direct government ownership. 1  BIS Review 121/1999  Petroleum production. In mill. Sm3 o.e.
These three sources of risk call for different policy actions. The first approach for dealing with asset price misalignments is for authorities to communicate their views on the extent of potential asset price distortions and their consequences for financial stability. These “verbal interventions” are relatively common regarding the exchange rate. I see no reason why we should not use them also for other assets such as bonds and equity, since they are relevant variables from the point of view of macroeconomic and financial stability. Indeed, recent experience has shown that central banks need to be more assertive and communicative about the conduct of financial systems. In our last Financial Stability Report we indicated that evidence pointed to some overvaluation of stock prices in Chile, but we also indicated that financial stability was not threatened by potential corrections, even sharp corrections, in these prices. Of course, making this assessment is not a trivial task – as modeling asset prices is complex – and it is not the role of central banks to communicate continuous assessments of asset prices. For this reason, this kind of communication must be done exceptionally, and in the context of discussing the potential implications of these price developments on current and future  BIS central bankers’ speeches  3  financial stability. In addition, communication must be done in a timely manner, before vulnerabilities build up.