Posted on 10/17/2015 1:24:02 PM PDT by Lorianne
In Norway's oil capital Stavanger, house prices are falling, unemployment is rising and orders of champagne and sushi sprinkled with gold are down - a taste of things to come for the rest of the country as slumping crude prices hit the economy.
The oil-producing nation used to be the exception in Europe. At the height of the financial crisis in 2009, unemployment reached just 2.7 percent; when other nations have had to cut welfare spending, Oslo could rely on its $856-billion sovereign wealth fund to plug any budget deficit.
But now it is joining the rest of Europe in its economic slump as oil prices have halved. GDP growth is expected to stagnate at 1.2 percent in 2015 and 2016. And the government expects to make its first ever net withdrawal from the fund next year as state oil revenues decline with crude prices.
"It is a new era for the Norwegian economy. We are no longer in a league of our own," Governor Oeystein Olsen said when the central bank unexpectedly cut rates to 0.75 percent on Sept. 24 to support a slowing economy.
(Excerpt) Read more at reuters.com ...
It’s just like Grandma used to say,
“Catch da herring. Clean da herring. Cook da herring. Raid France.”
Norway’s error was much the same as Mexico’s in relation to crude oil revenues. The first beneficiary was to the government, not to entrepreneurs whose business it was to extract, transport and broker the oil in various venues.
By limiting private investment and incentive in the production of the crude, the amounts taken out for “profit” to the owner and holder of record, the government, were too great when the revenues were very high, leaving little or nothing as a cushion when the price of crude dropped. Having committed far too much of a share of the revenue to other government operations not logically connected to the extraction of oil, the falling market price severely impacted the funding and administration of many of these other government-run agencies, and since Norway is far more dependent on these government-commercial joint operations than many other countries, the ripple effect was wide-reaching. Perhaps only Venezuela and the Russian Federation suffered greater displacements when the world price of crude fell.
Unfortunately it usually takes a war to bring people and politicians back down to earth and the way things are going another one may not be too far off.
Mexico’s corruption did in their oil industry. Norway, on the other hand, has invested its royalties and is now one of the world’s largest stockholders.
stock and real estate.
Norway owns about 1 percent of world stock I think, but is increaswingly diversifying into real estate. London. Paris. NY.
Wonder if Trump did business with us...
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