
Norway Idea to Exit Oil Stocks Is ‘Shot Heard Around the World’ - anigbrowl
https://www.bloomberg.com/news/articles/2017-11-17/norway-idea-to-exit-oil-stocks-is-shot-heard-around-the-world
======
loeg
> The Nordic nation’s $1 trillion sovereign wealth fund said Thursday that
> it’s considering unloading its shares of Exxon Mobil Corp., Royal Dutch
> Shell Plc and other oil giants to diversify its holdings and guard against
> drops in crude prices.

That doesn't sound like activist divestment. And in fact, environmental
activism isn't why Norway is considering this action:

> Norwegian officials say the plan isn’t based on any particular view about
> future oil prices

> ...

> the move has more to do with hedging risk than saving the planet. Norway
> derives about 20 percent of its economic output from oil and gas. Finance
> officials have long debated whether reinvesting those profits back into
> petroleum producers leaves Norwegians overly exposed to the volatility of
> oil prices.

So the headline and intro are fairly misleading, IMO.

~~~
mtgx
Although driven by their own policy, the fact that _almost half_ of the new
cars in Norway are electric/hybrid vehicles is incredible. I think they know
EVs are on a growing trend, and they just get to see it at an accelerated rate
than everyone else - but they probably believe the same will happen elsewhere,
just 5-10 years later. I think it's unlikely that this wasn't at least a small
factor in their decision.

I also believe that as EVs grow to 5%, 10%, 20% of the global sales for cars,
Norway will increase its "hedging" over the next few years, which will show
some direct correlation between EVs and Norway's decision to hedge its oil
stock risk.

~~~
semi-extrinsic
One should factor in that Norway's petroleum exports are ~50% natural gas (of
which <1% goes to fuels for cars) and ~50% oil (of which ~60% becomes fuel for
cars, trucks, tractors, excavators, airplanes, etc.).

So the total "negative exposure" towards EVs if all cars everywhere become
electric is <30%.

Furthermore, the retail sales of gasoline and diesel fuel has not yet shown
any decline in Norway [1], despite EV-subsidising policies being in effect for
a decade. So decreased fuel sales volume has a many-year (perhaps even decade)
long lag behind increased EV sales. (The average Norwegian car is 17 years
when it is scrapped.)

[1] [https://www.ssb.no/en/energi-og-
industri/statistikker/petrol...](https://www.ssb.no/en/energi-og-
industri/statistikker/petroleumsalg/aar) \- petroleum product sales
statistics, English description, you can export to csv file.

~~~
igravious
> the retail sales of gasoline and diesel fuel has not yet shown any decline
> in Norway [1]

Odd. The stats you point to say otherwise. Says motor gasoline is down (1.9%)
and diesel is up (4.7%) – so it's kind of a wash.

More interestingly (in the context of this news of divestment) the total
figures are down year on year on year

(in 1000 litres units)

    
    
        2012    9 635 521
        2013    9 279 405
        2014    8 995 567
        2015    8 827 093
        2016    8 790 684
    

In light of those figures divestment looks sensible.

~~~
semi-extrinsic
No, you have to look at just the sum of dutiable diesel and gasoline, which
shows no decrease (even an increase). Most of the change you're summarizing
above is reduced usage of light fuel oil (for heating), marine fuel and heavy
distillate, particularly the latter two. Those changes are not caused by EVs.

------
prewett
"Sharp retreat: European oil stocks react"

I wish financial reporters would stop using blatant hyperbole. The graph shows
a -0.21% drop. That's nothing. The intraday noise is half that amount. 5%
might be a "sharp drop," 10% definitely would be, but 0.2%, is not even a
blip. A more realistic report would be "European stocks practically ignore
Norwegian fund's announcement to leave oil" but that would not support their
message that Norway is doing this as a statement about climate change. (In
fact, as reported, their statement said nothing about the reasons for
diversification, so the report's twisting that into a polemic about how
everyone is abandoning oil is unjustified.)

~~~
gervase
"Minuscule blip: European oil stocks not really affected" doesn't grab those
clicks, though. They won't stop using hyperbole for headlines unless the
evolutionary pressure (i.e. revenue model) significantly changes for news
media.

~~~
em3rgent0rdr
"Sharp drop or miniscule blip? Environmental activism or cold economic
calculation? Find out which Nordic country made this sudden bold move to their
portfolio!"

------
m12k
So while this doesn't appear to be an 'ethical divestment' but more of a
'spread the risk'sort of move, I'd still like to say: I've never heard a
convincing argument for ethical divestment (and this is coming from someone
who's a bit of a SJW). My main point is that unless you buy stock in an IPO,
then buying shares does not increase the funds the company has available to
perform its operations (some or all of which you may disagree with ethically),
so you're not changing anything. Unless you think that you can shame the whole
world into not buying the stock even if it's a good investment (yeah, right),
then all you're doing is making sure the company is owned by people more
scrupulous than yourself. If you really want to influence a company to change
its ways, you should become a major shareholder and actually change it. And if
a given company is the best investment you could make (to the best of your
knowledge), wouldn't you be able to accomplish more good with the money you
could make from that investment? (e.g. using the money to lobby lawmakers to
make a carbon tax does way more than divesting from fossil fuel companies
does). So it seems to me that ethical divestment has this in common with
terrorism, that the action itself doesn't actually achieve anything, and the
whole point of it is really just to cause a fuss and get in the news.

~~~
pouetpouet
I think the reasoning is that divesting can reduce demand for a stock. Thus
reducing the stock price, and reducing the future financing capacity of the
company.

~~~
maxlamb
The only financing that happens with a stock is at the point of IPO, which is
obviously not applicable for these ancient oil companies. I'm not sure an oil
company has issued more outstanding shares for financing in a very long time.
They get the vast majority of their financing through low-interest debt.

~~~
sokoloff
> The only financing that happens with a stock is at the point of IPO

False. Companies make secondary offerings for acquisitions or other purposes
as well as issuing shares as part of employee/executive compensation.

------
nkurz
This seems like a particularly bad article, especially considering that it's
published in a business publication. While the article does say:

 _Norway derives about 20 percent of its economic output from oil and gas.
Finance officials have long debated whether reinvesting those profits back
into petroleum producers leaves Norwegians overly exposed to the volatility of
oil prices._

It fails to state clearly that the only reason that Norway has a $1 trillion
dollar surplus of funds is because of their oil wealth. They are divesting
from oil stocks due to simple goal of diversification, to prevent the
Norwegian economy and the fund from being too closely coupled. While it's
gauche to quote Wikipedia as the arbiter of truth:

 _The Government Pension Fund Global, also known as the Oil Fund, was
established in 1990 to invest the surplus revenues of the Norwegian petroleum
sector._

 _The Government Pension Fund Global (Norwegian: Statens pensjonsfond Utland,
SPU) is a fund into which the surplus wealth produced by Norwegian petroleum
income is deposited. Its name changed in January 2006 from the Petroleum Fund
of Norway. The fund is commonly referred to as the Oil Fund (Norwegian:
Oljefondet)._

 _The purpose of the fund is to invest parts of the large surplus generated by
the Norwegian petroleum sector, mainly from taxes of companies but also
payment for licenses to explore for oil as well as the State 's Direct
Financial Interest and dividends from the partly state-owned Statoil. Current
revenue from the petroleum sector is estimated to be at its peak period and to
decline in the future decades. The Petroleum Fund was established in 1990
after a decision by the country's legislature to counter the effects of the
forthcoming decline in income and to smooth out the disruptive effects of
highly fluctuating oil prices._

[https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Nor...](https://en.wikipedia.org/wiki/Government_Pension_Fund_of_Norway)

The most charitable interpretation I can come up with is that BloombergMarkets
assumes that everyone bothering to read the article already knows this. But
somehow I doubt this is true, and that the authors were actually making this
assumption. So why is it written this way? Spin, ignorance, or just bad
editing?

~~~
milankovic
Excellent observation, this just irked me as well.

> So why is it written this way? Spin, ignorance, or just bad editing?

I don't know. Good question, though. A symptom of the journalism crisis in
general? I can't remember where, but I think I read something about it a
couple of days ago, something along the lines of a bubble of digital
journalism, about to burst pretty soon, etc.

~~~
rainbowmverse
I read it too. Though Pocket, without ever seeing ads.

[http://talkingpointsmemo.com/edblog/theres-a-digital-
media-c...](http://talkingpointsmemo.com/edblog/theres-a-digital-media-crash-
but-no-one-will-say-it)

~~~
milankovic
Yes, that's what I meant. Thank you.

------
mrhappyunhappy
Anyone know of index funds closest to vanguard low cost options that exclude
oil and other stocks not friendly to the environment? I wish there was a fund
where I can handpick my investments through exclusion of various categories
against my core values but without having to pick individual stocks. Perhaps
this exists and I’m just unaware?

~~~
rightos
There are a number of "socially responsible" ETFs with quite low fees - not as
low, but not bad. Most focus on environmental goals, though some have worker
rights, "biblical values" or equality goals too, some also seek to derive most
of their revenue from the renewable industry. That's definitely riskier, but
may appeal to some.

[http://www.etf.com/sections/features-and-
news/top-10-sociall...](http://www.etf.com/sections/features-and-
news/top-10-socially-responsible-etfs?nopaging=1) has some basic details about
some popular ones.

~~~
swarnie_
If your interested in the opposite there is always the VICEX EFT.

"VICEX, as the ticker implies, holds a basket of stocks specializing in
alcoholic beverages, tobacco, gaming and defense/aerospace industries"

Just missing CXW and its 6% dividend to round out the fund.

~~~
amontes
In this context the "opposite" would be something like an energy or utility
ETF (like Vanguard's VDE or VPU), funds that are 100% invested in fossil fuel
infrastructure.

------
freen
It's impressive the way Norway has manage to avoid the Resource Curse
([https://en.wikipedia.org/wiki/Resource_curse](https://en.wikipedia.org/wiki/Resource_curse)
) unlike Saudi Arabia, Venezuela, etc.

Great article on slate about it:
[http://www.slate.com/articles/business/moneybox/2004/10/avoi...](http://www.slate.com/articles/business/moneybox/2004/10/avoiding_the_oil_curse.html)

While the economics of it are sound, i.e. diversification, etc. it still is a
major asset movement by an investor who would otherwise be strongly bullish on
the commodity. Any way you slice it, this is a big deal.

~~~
stevenwoo
Some think the curent corruption crackdown in Saudi Arabia is merely an excuse
to seize the assets of eveyrone opposed to the official diversification plan.
[https://www.theguardian.com/world/2017/nov/10/how-the-
saudi-...](https://www.theguardian.com/world/2017/nov/10/how-the-saudi-arabia-
anti-corruption-crackdown-will-play-out)

------
ddmma
Norwegian Business School and the government have looked and promoted for
years solutions for the local economy after oil party will end-up. It’s a way
to speed-up this transition to a cleaner economy with the risk of loosing
some.. focus on the climate and lead that direction. Building a new church,
paying for past sins, nothing wrong with that.

~~~
vidarh
While this helps diversify, it doesn't really affect the transition of the
Norwegian economy, though - the oil fund only invests outside of Norway. There
is a much smaller fund that does invest in Norway, and the Norwegian
government does own a substantial proportion (about 1/3 last time I checked)
of the total value of the Oslo Stock Exchange, but that's a separate issue
from the oil fund.

------
NightlyDev
It's not like the idea should surprise anyone. It has always been a discussion
whether or not to invest in oil.

A big part of the idea behind the oil fund is to make sure the county has
resources if the income from oil where to decline. Investing in oil when such
a high percentage of Norway's income is from oil might be a bad idea.

This is nothing more than "it might be a bad idea to put all the eggs in the
same basket".

------
mathattack
This is just prudent diversification. If you work at Google and your personal
capital is tied to Tech, go easy on Tech stocks in the retirement account.
Bankers who held too many financial services stocks in 2008 saw their 401Ks
crater at the same time they lost their jobs.

If the fund is to diversify away from oil, silly to buy oil stocks. If oil
does well, they have more in the ground.

~~~
RatnlExpctns
Interestingly, I believe this is a part of Eugene Fama's original argument for
the value premium (workers buying stocks in industries outside their own).

------
unabridged
Saudi Arabia has been diversifying out of oil for at least a few years.
Everyone sees the same thing. We are one battery technology breakthrough away
from gasoline being unnecessary.

------
dagss
A related news item these days rolling in Norway is how a big investment
(Goliat platform) is posed to make a net loss, costing the goverment a lot of
money due to the tax regime. (Jury will be out for many years, investments in
arctic oil happen 10-15 years before thw income).

Because of the high extraction costs for Norwegian oil, it is possible for
Norwegian oil to crash, while other oil producers are still massively
profitable.

So it is not about "oil or not oil" as such but the oil price.

------
Angostura
Isn’t that a rather odd announcement?

If I was thinking of selling a huge amount of shares, I’m not sure I would
announce I was considering selling and drive the price down.

What was their thinking here?

~~~
kristofferR
It's such a big decision that it has to be debated and decided upon by
Parliament, so it can't stay secret.

~~~
runarb
Yes, as I understand it the petroleum found does very little active
management, but instead have a mandate to hold stock based on the FTSE Global
All Cap Index.

Changing the mandate require approval by the parliament.

~~~
vidarh
It does do active management in some asset classes. E.g. real estate purchases
and the like. It also does buy or divest shares based on various other
consideration, such as ethical rules. But you're right that they're investing
according to a mandate set by government so they're limited in what they can
do.

------
_ph_
An interesting piece of news. While this does not mean that the oil industry
is going to die tomorrow, it sends the clear message that Norway starts to
think that their money earned from oil production might be better invested
long-term into something else. This is probably not surprising, but definitely
another indicator that oil isn't "the future" any more.

------
lafar6502
Why they keep pumping out their oil and buying financial junk for this, I
really don’t understand. Just keep the oil in the ground if you want safety
fund, stop financing all kinds of modern tech bullshit around the world. This
is my advice to Norwegians, your fund is going to turn into pile of junk when
you most need it. Conserve your resources instead.

------
Geekette
Seems to be a media attempt at drumming up panic. The post outlines that the
Norwegian fund won't be the first institutional investor divest itself of
fossil fuels and is doing so for simple diversification purposes. The
decision's also not set in stone and will take at least a year to be
finalized.

------
sunstone
When the Rockefellers divested of oil and gas a year or two ago that was a
heads up to everyone that they should reconsider this asset class.

------
inoc99
Norway is typically not behind the trends. I hope O&G's contingencies are
ready for execution. That's 1 trillion.

------
sosa2k
It's quite obvious they're doing this to diversify. It's not exactly a shock.

------
shmerl
Smart forward looking decision.

------
inoc99
:Norway is typically not behind the trends. They set them.

------
bhouston
I worry about Canada's significant dependence on oil as well.

~~~
anonymous5133
If the world ever diversifies away from oil then Canada will take a major
downturn. Canada is the 3rd or 4th largest oil exporting country.

