How Norway has avoided the 'curse of oil'
bbc.com
bbc.com
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.
Further, Labor's infighting put off a lot of people while the Coalition were consistent with their message in opposition.
Out an out corruption basically. The country began because of a miners revolution, and to this day they have more power than they earn.
The large coal mine (by an Indian company) despite declining coal prices, and the state earning more money via tourism, is going ahead because of brilliant control by the mining companies. This company has a terrible record of keeping their mines clean as well. Not only that, but the carbon produced is similar to all planned carbon saving planned by the government proving they lied about reducing carbon themselves. Further more coal kills a million people per year through pollution, and China is reducing their spend on coal, like most other countries. Which means the price of coal is only going to fall.
[1] http://www.smh.com.au/federal-politics/political-opinion/a-n...
[2] http://www.afr.com/p/national/gillard_rejects_call_for_wealt...
I hope the opportunity to capitalise isn't completely lost.
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.
Is there an obvious reason they couldn't sell their oil forward (or just sell futures)? You can sell oil forward three years for around $89 a barrel at the moment, as opposed to around $93 a barrel for delivery next month.
That's for WTI, and Brent is currently even more (in fact the Brent curve is in contango at the moment). I don't know what grade Australian oil would be, but I wouldn't be surprised if it's closer to Brent than to WTI.
Not agreeing with OP, but playing the lottery can be both unprofitable, and create a few rich people.
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.
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.
Further reading: http://www.ft.com/cms/s/0/99680a04-92a0-11de-b63b-00144feabd...
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
http://www.npr.org/blogs/money/2011/08/26/139972557/the-frid...
"Public resources being invested sensibly! Horrifying! You can tell that this is an awful idea by looking at how miserable the people of Norway are, and how badly their businesses are doing.
You should liberate yourselves by giving all of it to private interests. That's the definition of freedom!" /end sarcasm
Different definitions. The current American political ones aren't universal by any means.
As a Finn I always find it really weird when visiting places outside Nordic Countries that for them most of the country is unaccessible.
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.
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.
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.
One night of camping is not years, but squatter's rights certainly encourages land-owners to be ever-strict about visitors to their land.
That being said, there's a lot more that could be done, such as allowing kayaks into rivers and lakes without so many unreasonable limitations and/or paperwork.
http://www.independent.co.uk/news/world/europe/norway-kills-...
Oh and whale meat is delicious.
There's also the water issue. If you run out of water in the west while on your hike/tramp, you're in life-threatening trouble. And there's often no cellular service.
[0] http://www.washingtonpost.com/blogs/govbeat/wp/2013/10/15/al...
https://en.wikipedia.org/wiki/Pioneer_%28film%29
60+ reported to have died, and diving at that depth has since been disallowed.
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.
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.
The current government seems determined to paint the NHS as failing in a pretty blatant attempt to privatise large chunks of it, the bastards.
I used to be pretty neutral towards the major parties, tending to look at what they did rather than what they said but quite frankly the conservatives can go and fuck themselves.
If it's simple, why not move there yourself?
It's something at the back of my mind for one day though.
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.
My primary comparison is that, since the oil boom, their results have fallen off in nobel prizes, not significantly increased. And those two prizes they won in the last 40 years were for economics (they were winning them for chemistry and physics in the '60s / '70s).
Ireland has won five since 1974, they only have 4.5 million people, and no grand oil boom, and have only recently become well-off.
Denmark has 5.5 million people and have won four nobel prizes in those 40 years, for chemistry, physics, and physiology.
My point is: where are the results outside of energy production? We should be seeing amazing innovations, great technology, and big technology exports, incredible global contributions to science and break-throughs in medicine. I should be using phones designed by Norway, and software designed in Norway.
So where is it? There is absolutely no question Norway has created a high quality of life courtesy of the money from the oil boom, but what else have they done with it other than provide lots of money to live well (ie what do you have to show for it if the oil is gone in ten years)?
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.
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:
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. :)
The oil industry dominate new investment. Although a lot of that is high tech solutions and can probably be used in other sectors, especially in related areas such as marine and shipping solutions, but they do not invest very well in any other area.
Some new companies are successful (Fast,Trolltech,Kongsberg,etc) but it is more in spite of the investment available. The VC, general investment and interest is barren if you compare the buoyant start up market in Denmark, Sweden and Finland.
I am worried about the state of affairs in 20-30 years if they not e.g. follow Finland's post Nokia incubation assistance etc. (IMHO as a Norwegian living in the UK).
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.
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.
There are a lot of forces at play and real-politic cynicism is one of them, not always one of the biggest.
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 :-)
This list ranks SWFs by size- notice there are several US states on the list: www.swfinstitute.org/fund-rankings/
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.
Norway's success is a strong case for localism.
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.
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.
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
There's also the Hibernia field with the largest oil platform in the world.
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.
[1]: https://translate.google.com/translate?sl=no&tl=en&js=y&prev...
[2]: https://translate.google.com/translate?hl=no&sl=no&tl=en&u=h...
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.
That will become a problem in the US as well, since US highway construction and maintenance is mostly funded from motor fuel taxes.
Land value taxation and severance taxes can help recapture the value of our Commons, and allow us to reduce taxes on labor or investment.
Norway however has a huge problem coming, soon. Their oil production is running out rapidly: 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.
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.
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.
For reference NY alone has a population of about 8 Million.
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.
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.
Where did you read I said that ? getting hired doesn't mean I'm a genius. I means they need me and are ready to hire me and maybe help me move there. stop with the misconceptions, I'm not narcissistic. I'm just saying I don't have savings, so I can't put myself in debt and risk going there and not getting a job.
Sometimes life involves tasks that are very slightly unpleasant, like paperwork. You might find that learning a tolerance for this minimal degree of inconvenience will yield benefits down the road.
I don't have money to throw away at a round trip to Norway, not to mention a place to stay for 1 week or two. What do you mean "show off your skills" ? I'm not an entertainer... I have no skills in PR and selling myself.
> hackerspace
Is a hackerspace going to get me a job ?
> Sometimes life involves tasks that are very slightly unpleasant, like paperwork.
The task of getting a job in norway is going to be paved with a lot of obstacles. I'm ready to move out, go there and do interviews, but if nobody can promise me to hire me before I actually have a place to stay, I won't move there to not find a job and come back with debt.
How do I really promote my project of seeking work in norway all by myself, while I live in france ? I already speak english, so that's a plus...
note: I have no job experience.
Nobody is going to promise you a job in Norway. You have to go make it effing happen. I don't mean to be vulgar, but to express that if you want it badly, if it damn near hurts not to have it, you'll make it happen. At this point you don't seem to know what you want. Even if you have no job experience, you could at least have project experience. Show off what you've done with Arduino, or open source, or painting, or skateboarding, or radio, or whatever. (This is a tech focused forum but hey, skills and drive come in many shapes)
Well, apart from paperwork, study of the country/state/city you want to go to. If that's too boring and you want the "no questions asked, come work here" treatment, I guess there is something stopping you after all.