Cheap oil causes Norway to prepare for something new: unemployment
Copyright © 1999 Nando Media
Copyright © 1999 Associated Press
By DOUG MELLGREN
OSLO, Norway (February 28, 1999 2:46 p.m. EST
nandotimes.com) - A lingering glut on the world
petroleum market has Norwegians bracing for a
problem they had nearly forgotten after years of
prospering on oil wealth: unemployment.
Some fear the slump could cost 30,000 jobs in the
national oil and shipyard industries. That would be a
staggering blow to a country where an average of just
56,000 people - 2.4 percent of the work force - were
without jobs last year.
On Friday, the government summoned
representatives of the oil industry to see what could
be done. Easing heavy taxes on oil was seen as
possibility, although no decisions were made.
"There is a willingness to pull together," said Oil
Minister Marit Arnstad after the meeting. "The
industry itself is willing to make an effort, which it will
have to do. The unions are willing to discuss things
with industry, which they will have to do. And we from
the government are open to considering measures,
which we also have to do."
Norway is the world's second largest oil exporter,
pumping about 3 million barrels a day. With just 4.4
million people, the country has had more money than
it could spend. The government has been salting
away the surplus in a national Petroleum Fund that
now has $22 billion as a cushion against the day oil
production declines.
But oil prices are now below the $12 per barrel it
costs for exploration and production.
Gunnar Berge, head of the state petroleum
directorate, last week said a sense of panic seemed
to be spreading throughout the national oil industry.
Berge's comments came during what Norwegians
are now calling "Hell Week." The country's three oil
companies, state-owned Statoil, state-controlled
Norsk Hydro and private Saga Petroleum, all
announced poor profits and plans to lay off as many
3,500 people.
A slump for oil companies can easily spread to other
concerns that provide engineering services, supplies
or build oil platforms. Aker Maritime - a major
offshore supplier - last week said it may have to lay
off 2,000 people.
"The effects of low oil prices on Norwegian society
are serious," said Deputy Oil Minister Erlend
Grimstad. "But I don't agree that there is a panic by
the oil companies or the government."
On Thursday, the state labor directorate revised its
unemployment projections for 1999, saying that the
jobless rate would increase by 15,000 people to 3.1
percent by the end of the year.
That may be conservative. The Norwegian news
agency NTB checked with virtually all oil-related
concerns, which now employ 110,000 people, and
counted as many as 30,000 jobs that could
disappear this year.
Until now, the problem in Norway's labor market
seemed to be finding enough people to fill all the
jobs. Unemployment was so low last year that labor
unions were able squeeze a more than 6 percent
average pay raise out of employers. The six-year
boom was getting so hot last year that experts and
the government feared the economy was set to
overheat.
But there was also good news for Norway in its
misery of low oil prices, according a report from the
Organization for Economic Cooperation and
Development last week.
It said a tight 1999 budget adopted by the
government, reduced spending by industry, if
combined with moderate wage increases this year,
could allow the Norwegian economy to cool off
without nose-diving into a slump.
Svein Gjedrem, governor of the state central Bank of
Norway, warned the government to resist the
temptation to spend too much of its oil wealth to
stimulate the economy and create jobs.
"Pursuing such a policy - assuming that the oil price
remains low - would have a major impact on the
government's ability to finance the welfare state. He
said at current oil prices, an increase in government
spending of just one-half of a percent of gross
national product per year would have Norway running
a budget deficit in 10 years.
"The petroleum fund would suffer a sad fate and be
depleted in 18 years," he said.
nandotimes.com
Both the Caspian and the North Sea regions have oil costing $12 a barrel, more than what they get from selling it. Does this seem to have a pattern?
Charles |
