Unhappy Nordic Boom

As oil profits continue to gush into the Persian Gulf nations, other governments, too, are beginning to make money from the stepped-up quest for oil. In the North Sea, explorations have so far turned up more than 20 billion bbl. of proven reserves, nearly 4% of the world total. Norway alone has proven reserves of about 6 billion bbl., and experts believe that the potential is at least twice that amount. Surprisingly, though, Norway is approaching its new riches with Scandinavian solemnity. Government planners predict that by 1981, oil output will pump more than $2.7 billion in yearly revenues into the Norwegian economy. The inflow, they gloomily believe, may bring more problems--in disruption of other industries and inflation--than benefits.

Since oil was first discovered on the Norwegian continental shelf about five years ago, some 16,000 workers have left their jobs and flocked to the coast to work on oil rigs and supporting construction industries. As a result, the shipbuilding and fish-processing industries are suffering labor shortages. Manpower problems have even hit the Norwegian navy, which has been forced to lay up one of its five frigates for lack of trained personnel.

Cutting Hair. The Finance Ministry estimates that annual oil revenues by 1981 will be roughly 2 1/2 times what the economy can absorb. The government can spend some of its excess profits on social services. It can also reduce its steep income taxes (now ranging up to 90%). But University of Oslo Economist Erling Eide predicts that any reduction in taxation would lead to a severe inflation resulting from Norwegians' increased spending power. The only way to contain the inflation, Eide says, would be to revalue the krone to reduce the cost of foreign imports. Revaluation, though, would damage such Norwegian export industries as fish processing and paper by raising the prices of these commodities in foreign currencies. Significant unemployment would follow.

The Finance Ministry goes along with this dire prophecy and calculates that every $180 million in tax cuts by 1980 would indirectly put 4,400 people out of work by forcing revaluations that would damage export industries. The end result would resemble what the Financial Times of London calls the "Venezuelan effect," in which Norway's oil industry would become "the only provider to a population left mainly, otherwise, to cut each other's hair."

The Norwegian government is trying hard to slow exploitation of its riches. Britain and other oil-hungry nations have drilled more than 330 exploratory wells in the North Sea. Norway has driven only 120--even though Statfjord and part of Ekofisk--two of the richest oilfields--lie under Norwegian waters.

Fish and Rigs. In addition, the government has imposed stiff fees for concession rights and royalty fees of 8% to 16% on every barrel of oil produced. It has also proposed an income tax of up to 91% on all revenues earned from oil pumped in Norwegian fields. Moreover, it has created a state-owned oil company, Statoil, that must be included as a partner in nearly all private drilling ventures. The government flatly forbids drilling north of the 62nd parallel, where most of the nation's 30,000 fishermen live and work. The fishermen fear that oil spills and giant rigs will destroy their fishing banks. Besides being the mainstay of the nation's economic prosperity--at least until the oil boom--the fishermen represent a potent political force. Their displeasure could easily cost Prime Minister Trygve Bratteli his razor-thin coalition majority in the 1977 election.

Nonetheless, other nations stand to benefit from Norway's oil-related problems. For example, the Norwegians, like the Arabs, may be forced to get rid of excess oil profits through heavy investment in foreign banks and industries. Such investments could well create a valuable Eurokrone market. Even more important, oil-hungry nations may now look toward a new, possibly more cooperative supplier than the Persian Gulf nations.

This file is automatically generated by a robot program, so viewer discretion is required.