This also entailed the building up of expertise in our own country, which would secure a full order book for many years ahead – not only off our own shore. The activities on the Norwegian continental shelf would provide a boost to other industries in Norway. 1  Alexander Kielland (1880): Garman & Worse (Translation by W.W. Kettlewell). BIS central bankers’ speeches  1  Developing a new industry and spending the associated revenues also entailed challenges. The challenges were discussed in a white paper in 1974, Report no. 25 to the Storting, entitled “The role of the petroleum industry in Norwegian society”. If room was to be provided for supplying the oil sector and for increased consumption of goods and services, other industries would have to give way. The mechanisms described in the white paper are well known. I quote: “A transfer of production and jobs between firms and industries can occur via increased domestic cost pressures.” “Labour market pressures provide increased opportunities (...) for wage earners to find higher paid jobs.” “Firms in export- or import-competing industries (...) may be forced to downscale (...).” The country was indeed braced for structural changes and the attendant costs. But the white paper made it clear that restructuring was a necessary precondition for reaping the benefits of economic growth. We now know, more than 40 years later, that the structural changes did indeed come to pass. The industry structure of our economy has changed.
In the initial years under the fiscal rule, petroleum revenue spending rose approximately in pace with the GPFG’s capital. The fiscal rule, based on a real return of 4 percent, thereby provided an effective constraint on petroleum revenue spending over the fiscal budget. In recent years, high oil prices and solid returns have resulted in strong growth in the value of the GPFG. This has provided scope for substantial increases in petroleum revenue spending, although spending has been around 3 percent of the GPFG’s value in recent years. In a period of low unemployment and solid economic growth, it has been appropriate to set aside a greater share of the revenues. Recent years have been characterised by wide fluctuations in returns, with extreme variability during the financial crisis. Volatility on the world’s stock exchanges and in financial markets impacts the market value of the GPFG and thereby the anchor for fiscal policy. Although the depreciation of the krone has increased the GPFG’s current value in krone terms, this veils the fact that its international purchasing power is unaffected by changes in the krone’s value. Such volatility has become more difficult to manage as the GPFG has grown in size. Oil prices have fallen sharply over the past six months. Even if prices edge up again, we have been reminded of the uncertainty associated with future revenues. Lower oil prices imply slower growth in the GPFG than previously estimated.