Even Norway Gets the Dutch Disease

We sometimes think of Norway as the country where fossil fuel riches are handled responsibly, not like the Alberta and Canadian governments that just piss it all away.  Yes, Norway has amassed an impressive sovereign wealth fund from its Statoil royalties but, beyond that, it has many of the same problems that confront Canada.  Like us, Norway is at serious risk from the Carbon Bubble.   The big difference is they've kept their money and so have resources to deal with it.   From OurWorld2.0:


According to the OECD, the Norwegian economy is projected to expand robustly in 2013 and 2014, mainly due to investments in the petroleum industry as “[n]on-oil exports will remain weak. Strong demand for labour keeps unemployment low and wage growth high”. 
 
Unfortunately for oil-exporting economies like Norway and Saudi Arabia, oil-importing nations such as Sweden, Finland, Denmark and Germany are systematically working to reduce their oil dependency and demand. Meanwhile oil imports by others like France, Italy and Spain are declining as a result of the recession. Even China is trying to control the pace at which the demand for oil imports grows .

Taking a longer-term view, since oil, gas and coal are non-renewable resources, they will eventually come to an end. The most readily accessible and cheap sources go first. Then more expensive and unconventional sources (like tar sands, shale oil and gas) are next in line. Costs, especially external ones, increase for marginal sources, while profit margins decrease. Oil becomes more expensive, while the alternatives become cheaper. The oil sector is therefore a sunset industry, while renewable energy is a sunrise industry.

...It is risky to stand on only one big economic leg while Norwegian companies that could step in are on their way out of the country to places where labour costs are lower. Average hourly salary rates in the main trading partner countries in the EU were US$30 in 2012, while the Norwegian hourly rate was US$61 according to Eurostat. Outsourcing of jobs is inevitable with differences like that, while immigrant labour enters. Hotel and restaurant workers in Norway are now Swedish, construction workers are from Poland and Latvia and taxi drivers are from Pakistan. When the oil adventure ends, most of these workers will leave.

This situation is asymptomatic Dutch disease. But since the economy is doing just fine, what can even the bravest politicians do in circumstances when the patient appears to be well? They have to be really forward-looking and that is not easy in the short-term world of politics. A more responsible policy would be to recognize the vulnerabilities of the contemporary Norwegian economy and reduce the risks, sooner rather than later.

...Since Norwegian politicians seem unable to set limits on the oil industry, oil companies do it themselves. Statoil is responsible for their bottom line, not for what is best for Norway. Avoiding two degrees warming now requires a tremendous global effort.

 ...Statoil might in theory accept that two-thirds of the world’s known oil reserves should be left underground in order to avoid future climate disasters. They also argue that Norwegian oil production is more environmentally friendly than that of other countries. The production technology is top-notch, with well under 10 kg of CO2 emissions per barrel of oil extracted. But if the environmental argument is essential, Saudi Arabia extracts oil at slightly over 6 kg CO2 per barrel. If Statoil wants to be perceived as more environmentally friendly, they should at least get away from unconventional oil sources such as tar sands in Canada, with up to 100 kg of extra fossil CO2 per barrel of oil extracted emitted into the atmosphere.

However, all that said and done, deep inside we know that extraction of oil is not the main issue. The fuel consumption is. Regardless of origin, every barrel of oil burned means 400 extra kilograms of fossil CO2 is added to the atmosphere. Currently, the world burns nearly 90 million barrels of oil every day. 

Accumulation of CO2 in the atmosphere has already reached 400 ppm as of May 2013. If you include the other greenhouse gases we are up to 475 ppm. If we add the extra five percent increase of water vapor in the air that man-made global warming so far has caused, we are fast approaching 500 ppm. Without action, a warming of over three degrees could already be embedded in the system.

In this context, it is clearly irresponsible to continue to let the Norwegian oil pension fund invest in carbon-intensive activities. Norwegians instead must use the fund as a tool for a responsible climate policy, and invest in green technology.


Over the next decade we can expect major shifts as some of the Organisation for Economic Co-operation and Development countries probably will halve their oil imports, renewable energies become cheaper than fossil fuels, and new technologies are introduced like smart grids, improved battery storage, and electric vehicles with longer range. Norway, with its oil dependent economy, risks being left behind. At the same time, we will begin to see clearer signs of climate change and associated social and economic impacts including growing refugee flows.

There are some changes that Norway could make to ensure it is better placed to respond to these challenges and to start reducing the 250,000 vulnerable oil-based jobs in the economy. First, diversify the economy — renewable energy, eco-friendly processing, fisheries, tourism, nanotechnology, robotics, green architecture, self-sufficiency, and information and communication technologies are some of the natural priority areas for Norway. Second, use today’s wealth to make this new economy a reality — stop state guarantees, tax cuts, special arrangements and other incentives for increased oil exploration and production, and redirect those funds to other industrial sectors. Third, elected politicians need to step forward and govern the Norwegian economy and take the reins away from Statoil.

The Norwegian economy and Norwegian society should have more to stand on than a single crumbling petroleum leg.

Another Warning on Oil Prices

This must be music to ever Petro-pol's ears.  High oil prices are back and they're back for good.  Think of all that vast, unearned wealth just waiting to be boiled out of the ground in Athabasca.

The European Union energy czar, Guenther Oettinger, says $100 a barrel oil is here to stay.   Prices dropped considerably during the recession due to low demand but today's prices are going straight back up especially with increased demand from Asia, the political unrest in the Middle East and the warning that Saudi Arabia's reserves may have been overstated by as much as 40%.

The EU is actively trying to reduce oil consumption but Asian demand will more than make up for any European decrease.  

High world oil prices increase the pressure for more bitumen production in Athabasca and might put Alberta right back on top again, this time perhaps for a decade or two.  Whether that's a good thing for Alberta, for Canada or for the world is debatable.

It's a double edged sword.   Higher prices at the pump encourage the public to become more aware, more fuel efficient.   But those higher prices also mean higher windfalls for the politicians, provincial and federal, who are quite pleased to see Canada turn into another petro-state.  This includes the opposition leader who fawns over the Tar Sands as the beating heart of the Canadian economy for the 21st century.  Is that what we've become?  Have we been reduced to that?  Is our country so degraded that it cannot prosper without that revenue?  What an odious thought from such an odd man.

The pressure is on.   Some prominent Americans would like to see Tar Sands production increased five fold.   The ramifications of that are mind-boggling.  Leaving everything else aside, there is the issue of greenhouse gas emissions and the farcical notion of carbon sequestration.  The Tories have their dodge.  It's called sectoral emissions reductions.  Sector as in some sectors will have to cut their emissions a lot more so that another sector is taken off the hook.  And what sector do you think the Tories intend to coddle on emissions?  But Steve will tell you it's all for the good of the nation and if you doubt that his sidekick Mike will back him up.

Deepwater Horizon is Not a Petro-Fluke

A long overdue, cautionary tale on the global dimension of oil disasters - including Athabasca - from today's McClatchey Newspapers. With attention riveted on the Deepwater Horizon disaster in the Gulf of Mexico, it's a story repeated around the world.

Like many of her neighbors, Celina Harpe is angry about the oil pollution at her doorstep. No longer can she eat the silvery fish that dart along the shore near her home. Even the wind that hurries over the water reeks of oil waste.

"I get so mad," she said. "I feel very sad."

Harpe, 70, isn't a casualty of the oil spill in the Gulf of Mexico. She lives in a remote corner of Alberta, Canada, where another oil field that's vital to the United States is damaging one of the world's most important ecosystems: Canada's northern forest.

Across the globe, people such as Harpe in oil-producing regions are watching the catastrophe in the Gulf with a mixture of horror, hope and resignation. To some, the black tide is a global event that finally may awaken the world to the real cost of oil.

...There's no denying that the rust-red plumes of oil and tar balls in the Gulf of Mexico are a potential ecological calamity for American Southern shores. More than half the petroleum consumed in this country, however, is imported from other countries, where damage from exploration and drilling is more common but goes largely unnoticed.

No one's tallied the damage worldwide, but it includes at least 200 square miles of ruined wildlife habitat in Alberta, more than 18 billion gallons of toxic wastewater spilled into the rainforests of Ecuador and a parade of purple-black oil slicks that skim across Africa's Niger Delta, where more than 2,000 polluted sites are estimated to need cleaning up.

..."Spills, leaks and deliberate discharges are happening in oil fields all over the world, and very few people seem to care," said Judith Kimerling, a professor of law and policy at the City University of New York and the author of "Amazon Crude," a book about oil development in Ecuador.

"No one is accepting responsibility," Kimerling said. "Our fingerprint is on those disasters because we are such a major consumer of oil."