A few billion saved is a few billion earned

Stephen Beard Aug 21, 2006

KAI RYSSDAL: Norway is the world’s number three crude oil exporter. It ships about 2.9 million barrels a day. Do the math and at the close for Brent crude in London today, that’s better than $200 million gross. Just for today. Sounds like a great problem to have. A fat, steady stream of government income. But, Marketplace’s Stephen Beard reports from Oslo, there can be too much of a good thing.

STEPHEN BEARD: Oslo doesn’t feel like a city in the grip of an oil boom. No glittering skyscrapers or flashy cars. No sign of the wealth that’s gushing into the government’s coffers. That’s because the government isn’t splashing it around.

ROGER SCHEERVA: We have succeeded in saving a lot of the oil revenue. We have salted away money for a rainy day.

Norway’s incredibly modest Minister of Finance Roger Scheerva. Without the slightest hint of bragging he explains how the country has used its oil revenue to pay off its entire national debt . . . and then accumulate a fund worth more than $200 billion.

SCHEERVA: First, to set aside funds for future generations. And secondly, to avoid overheating of the Norwegian economy.

Overheating goes against the grain with these cool and cautious people. Here, for example, is the equity trading room at a major bank [quiet]:

The main challenge is to stay awake. But the bank’s Chief Economist Magnus Andreassen is proud of his country’s soporific approach to money. And especially its handling of the oil revenues.

Currently running at more than $2 billion a month, it all goes into the oil fund, which is not allowed to invest in Norway, only abroad. Norway then only spends the fund’s average annual return, just 4 percent. That way, says Magnus, Norway has avoided the boom and bust that so many other oil-rich economies have suffered.

MAGNUS ANDREASSEN: We are spending those money in a very smooth and reasonable way. We haven’t increased spending at the same speed as revenues are now pouring into the coffers of the treasury.

Judging by the jolly crowds that lined the streets of Oslo during the national celebration this summer, the Norwegians seem happy. So they should. The U.N. ranks Norway’s standard of living the highest in the world. Taking into account income per head and social benefits, the Norwegians are well ahead of Americans. They spend so much on public education that there is no detectable illiteracy. Everyone has health insurance.

And they’ve got that nest egg. The oil fund is worth $50,000 for every man, woman and child. But all is not entirely well:

KRISTEN TYBRENG-JEDD: I think a lot of Norwegians are sick and tired of hearing that we are not able, or cannot spend any more of our money on the people living today. You hear about spending the money on the future generations.

Kristen Tybreng-Jedd, a member of the opposition Progress Party, has broken a Norwegian taboo and called on the government to chill out, drop the self-denial, and dip into the oil fund.

TYBRENG-JEDD: We feel that this wealth that we are hearing about, reading about every day is not being spent on Norwegains today, and our infrastructure in Norway, which badly needs a lot of investments.

He wants increased public spending now on hospitals and roads, hardly the height of fecklessness, but economist Magnus Andreassen says it’s a siren call which must be resisted. Norway, he says, already has quite enough public spending:

ANDREASSEN: We do invest in roads. We do invest in airports. We do invest in hospitals and schools. We have a quite high level of public spending in Norway.

Norwegians love both to conserve and to plan ahead. They’ve already built this oil museum, with this antique echo sounder used for underwater oil prospecting, on display. The museum will commemorate the industry when the oil runs out sometime after 2015.

Most would prefer to keep the oil fund as it is. But as the money pile grows, so will the pressure to let rip Norwegian style . . . and spend a little more on infrastructure.

In Oslo, this is Stephen Beard or Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.