Not only are production and price developments from one year to the next uncertain in the model, but also the average long-term oil price. The calculations start with today’s oil prices, but many of the resulting price paths are far away from this level. The probability distribution for the oil price that we have used is derived from historical variations. The distribution is highly skewed. The mode is lower than today’s oil prices, but we have also incorporated a substantial probability that the average price in the period 2005-2030 will be very high. Since the oil price and oil production are so uncertain, there will also be substantial uncertainty with regard to the funding of the pension system. It is true that the Petroleum Fund with some degree of likelihood may become sufficiently large to keep tax-funding of pensions at today’s level, measured as a share of national income. On the other hand, it is also highly probable that this will not be the case, and that tax-funded pensions will claim a markedly higher share of national income than at present. Normal prudence implies that we attempt to guard ourselves against the most adverse outcomes. One can find a parallel with the price assumptions applied by oil companies in connection with large investment projects with a long production horizon. Those prices are far lower than today’s spot and futures prices.
A survey of more than 31 European countries also shows that there is a high degree of job satisfaction among Norwegians.17 Demographic developments will have a dampening impact on demand for public services and social security disbursements over the coming years. The number of elderly among pensioners, i.e. 80 years and older, will not grow and the post-war generation will only start drawing on social security in the next decade. There will still be pressures for higher public spending. Demand for services we have chosen to let the government provide, for example health services, increases markedly when revenues rise at the pace they are rising today. Growth in government revenues – among others the return on the Government Pension Fund which is rising rapidly – also raises our expectations. At the same time, this is also a period of strong growth in demand for labour in the business sector. With the exception of part-time employees who want to work more, there are now few idle resources in the labour force. We cannot expect a substantial increase in the supply of foreign labour. Workers from other countries, such as Sweden and Poland with families and the largest share of consumption in their home country, have increased production capacity in Norway, but it now appears that the supply of foreign labour is starting to become more limited. Other inward labour migration does not generate higher value added per capita. Immigrants that become permanent residents make the same contribution to increasing demand as to increasing production.