
How Norway has avoided the 'curse of oil' - diminish
http://www.bbc.com/news/business-28882312
======
prawn
Statoil and how Norway essentially protected its future is a lot like how
Australia should have dealt with the so-called mining boom.

Named and outlined better, our "mining tax" could have been this. It could
have protected against capital flight and essentially built national strength
for all at the expense of those (especially foreign interests) looking to dig
up serious swathes of our ground.

Instead, we had a predictable response from the mining magnates and Coalition,
an easily duped and panicked public, and a flailing government at the time who
named the concept terribly and defended it poorly. And when challenged on the
whole "it's barely made any money" front, caved instead of noting that it'd
been potentially hampered for political reasons.

What's an easier sell to the public? "Mining tax" or "Future Fund; funded by
giant, mostly foreign mining companies."

Look at the Coalition's "$20b" medical research fund. So many people think
that's a current $20b fund, rather than a far smaller fund to be built up to
$20b over a number of years, and then to fund research only from the earnings
of the fund and not from the fund's base value. Labor should have framed the
MRRT much more like this and it would've made for a better sell. Avoid the
word tax, outline the goal with a specific value range and target date, and
name the beneficiaries of the earnings - technology research, medical
research, etc.

I can't see how this wasn't a big missed opportunity for Australia.

~~~
cylinder
Australia is basically like many African nations, where foreigners run the
resources sector and the locals hope to get a piece of the pie through
employment/wages.

However, Norway's resources are completely different to Australia's. Norway
_knows_ where the oil is, they just have to dig it up. So, they can just have
a state-owned company pump it out of the sea and keep the profits for
themselves.

OTOH Australia's minerals are hidden across a barren landscape the size of the
continental USA. Projects are very speculative and require huge investments.
New discoveries are being made every year all across the continent.

Hancock Prospecting (company now owned heiress Gina Reinhart, one of the
richest women in the world) was created when its founder crashed a personal
plane somewhere in the outback and discovered resources in the dirt (or
something like that).

Even when you do know where the stuff is, tens of billions often need to be
invested before anything is produced, like the new LNG wave.

There is no way the 23 million Australian citizens could invest this kind of
capital into speculative projects. One failed project would bankrupt the
nation. So, foreign investment is required.

But, even with minimal resource taxation/royalties, Australia is becoming
uncompetitive for many resource investments, with the AUD and commodity prices
where they are. Iron ore at its current price is now unprofitable, basically.
As well all know, corporations require a certain ROE to do anything. Nobody is
going to risk $10 billion for a possible 1% return. Massive LNG projects are
getting shelved left and right.

There's oil hidden all across Australia and her waters, too, but there is very
little infrastructure in place such as pipelines to transport the product to
terminals/refineries, like there is in the US. If Australia was to nationalize
its oil industry, would its people be willing to shell out tens of billions of
their own tax dollars to build this infrastructure? All speculatively, knowing
that their type of oil production is not profitable at all if oil once again
goes below $70 a barrel, which could happen overnight (see Sept-Nov 2008)?

While I could see some sectors of the resource industry being nationalized,
broadly it's just not sustainable. With costs where they are, there isn't a
ton of room for more royalties.

Best thing would be for policymakers to just move on from relying on mining
and start focusing on educating the population and competing where it counts
on the global stage.

~~~
lilsunnybee
How can prospecting and extraction be both simultaneously unprofitable and
also creating incredibly wealthy heiresses? If resource extraction and profit-
sharing in Australia is most closely compared to that of African nations, it
doesn't seem like the public is benefiting much from allowing their natural
resources to be appropriated and sold by multinationals.

~~~
eru
> How can prospecting and extraction be both simultaneously unprofitable and
> also creating incredibly wealthy heiresses?

Not agreeing with OP, but playing the lottery can be both unprofitable, and
create a few rich people.

------
phaemon
The steps of building infrastructure and investing outside the country, are
pretty much exactly the same as was suggested for Scotland in the McCrone
report in 1974.

Unfortunately, that report was classified as "secret" at the time, as it was
felt the conclusions would boost support for Scottish independence. It wasn't
released until 2005.

Link:
[http://www.oilofscotland.org/mccronereport.pdf](http://www.oilofscotland.org/mccronereport.pdf)

------
dharma1
Probably one of the best examples of how natural resource wealth has been
preserved and invested for the whole nation, instead of being lost to the
pockets of few through privatisation, corruption or mismanagement of funds.

I think the magic ingredients (aside from being lucky with natural resources
in the first place) are egalitarian society, high level of trust, very low
level of corruption, a functioning democratic government and highly skilled
fund managers.

~~~
thomasfl
Another Norwegian here. I think you are right. The high level of education
also helps. But it was actually an Iraqian immigrant named Farouk al-Kasim
that proposed the laws to protect Norways natural oil and gas resources.

Further reading:
[http://www.ft.com/cms/s/0/99680a04-92a0-11de-b63b-00144feabd...](http://www.ft.com/cms/s/0/99680a04-92a0-11de-b63b-00144feabdc0.html#axzz3BUIU9zB6)

~~~
dharma1
Finnish, not Norwegian - I think you guys have done great.

Read the story of Farouk al-Kasim a few months ago, fascinating. It does seem
like a stroke of luck that the right people were there in the beginning. His
nationality is both ironic and sad considering where Iraq is today

~~~
touristtam
Could it be the same one: [http://www.psmag.com/navigation/nature-and-
technology/iraqi-...](http://www.psmag.com/navigation/nature-and-
technology/iraqi-vikings-farouk-al-kasim-norway-oil-72715/) ?

~~~
dharma1
Yep, same guy

~~~
gkanai
Planet Money did a story on Norway and the oil curse:
[http://www.npr.org/blogs/money/2011/09/06/140110346/how-
to-a...](http://www.npr.org/blogs/money/2011/09/06/140110346/how-to-avoid-the-
oil-curse)

------
cel1ne
Since we're talking about how awesome Norway is, this [0] should be mentioned.

[0]
[https://en.wikipedia.org/wiki/Freedom_to_roam#Norway](https://en.wikipedia.org/wiki/Freedom_to_roam#Norway)

~~~
sharpneli
It's an awesome right.

As a Finn I always find it really weird when visiting places outside Nordic
Countries that for them most of the country is unaccessible.

~~~
k__
In Germany we don't got this right, but seldom I have been prohibited from
"roaming" the landside. But we aren't allowed to put a tent anywhere and sleep
in it, which is rather sad.

A friend of mine went on a hiking holiday in Scotland and he told me, he just
walked till he was tired, put his tent up on the next green spot and slept
there.

~~~
sliverstorm
_we aren 't allowed to put a tent anywhere and sleep in it, which is rather
sad_

Probably connected to the risk that squatter's rights poses to the land
owner... not that pitching a tent for a night is a serious risk, but
squatter's rights really encourages that kind of culture.

~~~
jakobsen
Not knowing anything about squatter's rights (or law in general), shouldn't it
be possible to just create a law putting whatever limits we want on camping
WITHOUT the need for it to be completely forbidden?

I am just now in a place where free camping is not allowed, but the local
authorities interpret the law as: "no tents between dawn and dusk". I wish
that was put into a written law.

~~~
sliverstorm
The key item of squatter's rights is that if a squatter occupies land with the
land-owner's knowledge for a number of years, the land now legally belongs to
the squatter.

One night of camping is not years, but squatter's rights certainly encourages
land-owners to be ever-strict about visitors to their land.

------
adamnemecek
The story of how Norway's oil industry started is pretty interesting
[http://www.ft.com/intl/cms/s/0/99680a04-92a0-11de-b63b-00144...](http://www.ft.com/intl/cms/s/0/99680a04-92a0-11de-b63b-00144feabdc0.html#axzz3BTZjZWgz)

~~~
bgdam
Non paywalled link:
[https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web...](https://www.google.co.in/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CBwQFjAA&url=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F99680a04-92a0-11de-b63b-00144feabdc0.html&ei=ZzD8U5-2PNKhugTgkIKABw&usg=AFQjCNGZKE8V3f8HTdRGPOV72rHCjwFMvg&sig2=QGH8Wwx3weGMwCVXMAXu5w)

------
praptak
I am jealous of Norway. Social relations in most other countries, even the
"first world" ones, seem uncivilized by comparison. I always wonder how they
arrived at this point - this looks like they have some magic ingredient that
made their Prisoner's Dilemma converge on 'cooperate'. It must be the fjords.

~~~
bigpeopleareold
Simple. I grew up in the US, but am in Norway now. I have Norwegian ancestry
that comes from my grandparents. Doesn't matter whether here or there. Mix
Lutheran-piety (even if Norway is quite secular) and a bit of boredom does
help in the cooperation department. I am not applying this to everyone, but
that is how it is.

None of this is a culture shock for me. Probably someone else has something
deeper to say about it, but I knew what I was coming to when moving to Norway,
in this regard.

~~~
jskonhovd
I have Norwegian ancestry as well. I would love to visit, but I don't think I
could live there. Also, The language looks absolutely terrifying.

------
noir_lord
I've often said the Nordic countries in general are as close to a Star Trek
style civilisation as we've ever gotten.

As someone who lives in America Lite (the UK) your policies on just about
everything strike me as insanely reasonable.

I pretty much feel shame whenever I think about our last two governments.

~~~
cylinder
Is there freedom of movement for UK citizens into Nordic countries? If not, is
the migration process hard or easy?

If it's simple, why not move there yourself?

~~~
surfmike
Yee, the proces is very simple. You can simply arrive and you have six months
to look for work. Once you get a job you just need to register with the police
(you make an appt a couple months in advance and then he visit takes 5 min)
and get your tax card (same visit, takes another minute). AFAIK all EU
citizens can do this, no special work visa required.

------
maaaats
Kinda ironic having the picture of the current finance minister, Siv Jensen,
there, as she is so opposed to us saving this money. She is mainly elected on
promises on lower immigration, cheaper alcohol, cheaper fuel _and_ lower
taxes. Planning to achieve that by using the fund's money.

~~~
varjag
Were she around in 60s/70s, she'd likely have banned al-Kasim, the geologist
who discovered Norwegian oil, from moving in.

------
makmanalp
There is also the related concept of "Dutch Disease"
([http://en.wikipedia.org/wiki/Dutch_disease](http://en.wikipedia.org/wiki/Dutch_disease))
which is what I expected this would be about. The idea is that once a country
discovers it has reserves of a valuable natural resource, it tends to exploit
and build its economy around that resource, at the expense of its more complex
sectors like manufacturing. Norway seems to have handled that decently well so
far, and part of the lack of spending probably comes from the fact that they
realize their oil's a short term freebie boost not an economic strategy.

~~~
adventured
I know a lot of people talk up Norway, but I'm not aware of anything that
Norway does economically that matters outside of energy production.

What great technology, companies, etc. have they produced in the last 40
years? What big innovations come out of Norway? Do they have the top
universities in the world?

They've only won two nobel prizes since oil became the center of their
economy, and they became rich. They won four in the 1920s, and four between
1968 and 1973. The oil wealth sure doesn't seem to have spurred great
knowledge acquisition.

~~~
pi-rat
The Cheese Slicer and Black Metal ofc! :)

On a more serious note, we're only like 5 mill people, and while we don't rock
the nobel prices I think the oil has pushed us more towards engineering than
theoretical research (for better or worse..). Agree our Universities should be
better than they are - it's apparently hard to get funding for something that
isn't directly applicable to oil, subsea or salmon.

But you probably use lots of stuff designed/invented in Norway without
knowing. Example: Do you use a GSM phone? GSM was invented at a Norwegian
University.

Lots of research for subsea-technology, oh, and we're pretty good at ship
design stuff - dating back from the viking age until now (x-bow). Techy stuff:
Energy Micro, Nordic Semiconductors, some parts of Atmel, Opera, FAST, etc.

Most of the oil welfare fund is invested abroad - all over the world (reduces
risk and avoids inflation), these days heavily geared towards green
technologies / energy.

~~~
adventured
Definitely fair points.

It's interesting to read about the debate on who deserves credit for inventing
GSM, with Switzerland, Finland, and France all claiming various credit.

And of course Norway re:

[http://www.ntnu.no/gemini/2005-01e/gsm.htm](http://www.ntnu.no/gemini/2005-01e/gsm.htm)

~~~
pi-rat
Didn't know GSM was controversial, that's very interesting, wonder what
happened there.

But still, I bet you interact with gadgets powered by tech from Norway on a
daily basis, even if we remove GSM from the equation: the Atmel AVR micros,
radios and micros from Nordic Semiconductor, Energy Micro and Chipcon, etc.
Maybe you also touch a UI built on QT (Trolltech), even though the QT phones
never became a success. :)

------
netcan
The economics of mining are complicated, but there are some similarities to
the startup/VC complex. A big part of developing mines is exploration. Finding
minerals can be hard, especially in the north sea. The oceans are big. The
difficulty is why there are still new deposits being discovered.

Exploration usually happens when the company doing it can hope to make money
off of a successful discovery. They might even pay for the privilege. Imagine
a scenario where a company finds a motherload of oil after a low probability
exploration. Their exploration contracts (being signed before the deposits
were known) guarantees them a huge profit. Unseemly, even. They are earning
that because they took a risk. Now they get their 100X. Try explaining that in
an election year.

New technologies are constantly being invented that improve exploration,
surveying & mining. This means that there are new possibilities every year
impacting which mine/well is profitable (minerals can be extracted at a
profit. These all change underlying economic realities. A $1bn per year mine
can only make a slim profit in years where commodity prices are high. It
employs many people. The next year commodity prices change or some new mining
or processing technique (fracking is a huge gamechanger) mean that some
complicated contract is now worth a whole lot of money. The $1bn goes from a
2% margin ($20m) to a 30% margin ($300m) and everyone want a piece of it.

Meanwhile government departments, unions, armies, etc are salivating over the
prospect of this wealth. The National University's long impoverished
Oceanography faculty has their eye on a fleet of research vessels. Academics
are starting companies offering to do (mandated) environmental impact studies.
There is a lot of pressure for money now, from industry, politicians,
constituents.

Politicians definitely don't want to be investing during their term for the
benefit of politicians 10 years from now. The world can be cynical, but not
always.

Norway has done well. I'm not sure if any one thing can be learned from them.
Have smart people running things. Meanwhile Norway have their own political
traditions, values, and probably pathologies.

~~~
chii
> Politicians definitely don't want to be investing during their term for the
> benefit of politicians 10 years from now.

you've hit the nail - short term gains vs long term losses. What you need is
some mechanism to make it so that the long term benefits align with the
benefits of the politician - for example, the project(s) you start stays with
you, even after you're term is over.

~~~
netcan
One nail perhaps.

There are a lot of forces at play and real-politic cynicism is one of them,
not always one of the biggest.

------
jensen123
Bergen is not the center of Norway's oil and gas industries. Stavanger is.

[http://en.wikipedia.org/wiki/Stavanger](http://en.wikipedia.org/wiki/Stavanger)

~~~
Swannie
That's what I thought too... But I'm biased, because I've only been to
Stavanger and not Bergen.

The reason I assumed for not having super cars around there is because it gets
too damn cold. Now the number of high end 4x4's I saw there... that's another
story :-)

------
valgaze
The rise of these sovereign wealth funds has been pretty extraordinary- if
corruption is kept under control those resources are politically "out of
bounds" for spending.

This list ranks SWFs by size- notice there are several US _states_ on the
list: www.swfinstitute.org/fund-rankings/

------
jonifico
I'm from Latin America and many countries here have more-than-decent resources
to make things happen, but the difference between us and Norwegians is trust,
and that changes it all. Take a look at Brazil, for example. There were over
20 megaconstructions planned for the World Cup and one one of them was
completed, the Maracana stadium. That's just an insane amount of corruption.
So, what happens? Well, since everyone's stealing, I might as well try to get
my piece of the cake, and that's when people start to become selfish A-holes
for lack generation after generation. We need a new mindset, better
governments and trust. Lots of trust.

~~~
adventured
Venezuela is the great example in South America.

They're, in theory, sitting on the world's largest oil reserves. Meanwhile
their production has been falling for 15 years because the government, under
Chavez and now, has squandered the opportunity.

They have somewhere between $10 trillion and $30 trillion in proven oil
reserves, depending on who you believe (either way it's immense). They should
be one of the wealthiest countries in history, right now. That's despite the
challenges around extraction and the quality of their heavy oil.

~~~
jonifico
That's a great example, as well. Although it gets even worse when you realize
what kind of government they're under. I mean, it's almost a dictatorship.
It's all just a big pitty over another.

------
timdierks
It seems to me that the high levels of trust necessary for this to work also
imply a high level of social cohesion (possibly homogeneity). In a society
with less internal agreement, I don't see how you could get this much
alignment over what is the right management strategy, let alone trust that
it's being followed.

~~~
larsiusprime
Don't forget SIZE. Norway is a tiny country, and so the distance between
people and government is small.

Norway's success is a strong case for localism.

~~~
zanny
Reading this, I realize that almost everything is a case for localism, since
we now have nuclear weapons and international instantaneous communications
that mean trying to invade a small country is much less reasonable (unless you
are Russia).

I mean, that is (in part) why the Greek model failed. Small countries are
vulnerable to conquest. But today that is not much of a problem, so I hope the
natural social pressure to minimize can overcome the entrenched imperialistic
powers that hold a lot of the larger nations together. It just makes more
sense to me to, say, have 50 countries and a EU in the US instead of one
massively overbearing federal that has authority over a land area competing
with continental Europe.

------
BorisMelnik
relevant:

[http://en.wikipedia.org/wiki/Resource_curse](http://en.wikipedia.org/wiki/Resource_curse)

------
gabriel34
Norway could have let its own citizens decide how to spend their share of the
money. That would probably result in some spending more than others, resulting
in inequality and an overall worse quality of life, even for the wealthier.

Instead they decided on a mandatory saving of the money. This might have been
good for them, but it creates a giant State which wouldn't fly in other
cultures.

~~~
tormeh
Not really. It's a bunch of traders sitting in an office. They don't really
make the state any bigger.

------
elchief
C'mon man. Norway's the #1 importer of Teslas [1]

Otherwise, man I wish Canada would manage our oil money like Norway. But we
burned that bridge a long time ago.

[1] look it up

~~~
Expez
The Tesla isn't priced as a luxury car in Norway. Electric vehicles are exempt
from taxes and fees, which is mostly where the money goes when you buy a more
traditional vehicle. They also don't pay anything when passing toll booths,
IIRC. Where I grew up, people now pay ~$10 just to pass toll booths to and
from work every day.

There are other benefits as well, like free parking, Tesla's free charging
station--and most importantly for many--you get to drive in the lane reserved
for buses and taxis instead of dealing with traffic to and from work.

~~~
Veinlash
All of this is indeed correct. People here don't buy Teslas or other
electronic cars because of the environment. Most do it for the economical
reasons listed above [1]. However there has been a lot of discussion recently
about whether these economical advantages are here to stay. Currently the
electric cars are clogging up the bus/taxi lanes and the government is losing
money as a result of the electric car boom we've seen here recently [2]. It
will certainly be interesting to see what removing the advantages will do to
the electric car market in Norway.

[1]:
[https://translate.google.com/translate?sl=no&tl=en&js=y&prev...](https://translate.google.com/translate?sl=no&tl=en&js=y&prev=_t&hl=no&ie=UTF-8&u=http%3A%2F%2Fwww.aftenposten.no%2Fnyheter%2Firiks%2FFolk-
flest-kjorer-ikke-elbil-for-a-spare-miljoet-7522953.html&edit-text=)

[2]:
[https://translate.google.com/translate?hl=no&sl=no&tl=en&u=h...](https://translate.google.com/translate?hl=no&sl=no&tl=en&u=http%3A%2F%2Fwww.aftenposten.no%2Fnyheter%2Firiks%2Fpolitikk%2FApner-
for-a-kaste-ut-elbilene-av-kollektivfelt-7666860.html)

~~~
maaaats
The clogging of the bus lanes because of electric cars is mostly wrong. It's
been a lot in the news, but no one has proven it. They all just point to the
correlation of more electric cars in the lanes. Not the correlation with more
traffic in general.

The clogging happens because every car wanting to get on or leave the highway
has to cross the bus lane. It's easy to see for yourself.

~~~
Veinlash
I don't live in Oslo so I can't comment on the situation there (or anywhere
else for that matter), but in Kristiansand the EVs are a very real issue in
the bus lanes. Granted, the bus lanes weave in and out of the general lanes so
congestion in the general lanes is the root of the problem for sure.

------
Gravityloss
I think the key is that Norway was organized, coherent and educated _before_
they discovered oil.

------
nwah123
Common resources should be treated as public assets. There's multiple ways you
could accomplish that, besides just nationalizing oil fields.

Land value taxation and severance taxes can help recapture the value of our
Commons, and allow us to reduce taxes on labor or investment.

------
lepht
Fascinating contrast to this Backstory Podcast episode about America's
relationship with oil: [http://backstoryradio.org/shows/black-
gold-2/](http://backstoryradio.org/shows/black-gold-2/)

------
adventured
The oil curse is a silly notion. The US and Canada have both avoided any
'curse.' China is the world's 5th largest oil producer, it too is certainly
not cursed by oil.

Norway however has a huge problem coming, soon. Their oil production is
running out rapidly:
[http://i.imgur.com/UlR1B0a.jpg](http://i.imgur.com/UlR1B0a.jpg)

It has fallen about 40% in a decade +/-.

Even with their large sovereign fund, they will exhaust that quickly if the
oil production doesn't stop falling soon. At the rate it's falling, in another
decade Norway is going to be in the midst of a crisis economically.

I know some people in Norway are paying attention to this and trying to think
ahead. Being conservative about the sovereign fund certainly seems like the
very wise thing to do.

~~~
angersock
_The US and Canada have both avoided any 'curse'._

Erm, consider the massive amount of environmental and policy issues that we've
had due specifically to oil. Had we not had so much of it in the early 20th
century, we probably wouldn't have had the automobile boom of today and the
long-term sabotage of public transportation.

There's a curse, all right.

~~~
adventured
Perhaps, but then again America would not have participated very fully in the
industrial revolution if not for oil, and would not have fielded a strong
military during WW2 without oil.

It's likely America would have not have been able to afford a vast, high
quality public transportation system had the economic foundations not been
built up in the first place. Especially considering the spread out population
base, and geographic size of the country.

------
suprgeek
TL;DR "Fairly homogenous country of 5 Million people total" coupled with some
good decision making.

For reference NY alone has a population of about 8 Million.

------
Kiro
So are they saving because they're afraid of overheating the economy or that
they will run out of oil?

------
known
And
[https://en.m.wikipedia.org/wiki/There_Will_Be_Blood](https://en.m.wikipedia.org/wiki/There_Will_Be_Blood)

------
jokoon
i want to go there so bad :(

~~~
CalRobert
Well, make it happen. University is one option:

[http://www.studyinnorway.no/Tuition-
Scholarships](http://www.studyinnorway.no/Tuition-Scholarships)

I say this not to be glib, but as someone who yearned to move abroad and found
out that it wasn't as hard as I thought.

~~~
jokoon
"However, you should take into consideration that living expenses in Norway
are higher than in many other countries."

I don't have a job right now, no savings, 29 years old, and paperwork bore me.
There are dozens of those "programs", and I don't want to spend one entire
week sorting it out to discover I can't afford to just live over there.

I want to go there no question asked, to work, not to study.

~~~
alkonaut
Try Stockholm, it has a huge tech sector and you can go there to work as an EU
citizen, no questions asked. You can't afford to live in stockholm either
without a job of course, but programmers get jobs quite easily if they speak
English, and salaries are decent.

~~~
tormeh
Actually, I think it's just as easy to get into Norway as an EU citizen
because Norway is in the EEC. It's confusing, I know, but the freedom of
movement thing is applicable here as well.

~~~
alkonaut
I'd think so too, but not sure about exact terms and amounts of paperwork.
Oslo has higher rents and prices but also higher wages and lower taxes. I
think he size of the tech/programming job market is probably quite a bit
larger in Stockholm though. So if the advice is for developers only, I'd
recommend Stockholm over Oslo. For many other jobs it would be the other way
around.

