Why Norway is Becoming the World's Richest Country

Summary

Norway is a geographic anomaly - despite having little arable land, harsh terrain, and a sparse population, it has been wealthy for centuries due to its expansive coastline and lush forests. After discovering offshore oil and gas in the late 1960s, Norway employed forward-thinking policies like state ownership, foreign partnerships, and its massive sovereign wealth fund to avoid typical 'petrostate' problems. Now, with some of the world's largest oil, gas, and emerging mineral reserves combined with immense renewable energy potential, Norway is positioned to remain a European and global energy superpower while diversifying into a broader economic giant.

Takeaways

• 😲 Norway has a massive coastline and rugged terrain, making travel by land difficult but travel by sea easy
• 🤑 Norway was already quite wealthy before discovering oil due to industries like lumber, hydroelectric power and shipping
• 💡 Norway took a pragmatic, long-term approach to foreign investment in natural resources like hydropower and later oil/gas
• 🌳 Norway's oil wealth did not lead to authoritarianism or inequality due to existing decentralized wealth/power and cooperative ownership
• 📈 Norway set up a sovereign wealth fund in 1990 to invest oil profits abroad, shielding itself from overreliance and price drops
• ⚡️ Norway uses ample renewable energy to meet domestic needs, freeing up more oil and gas to export and further diversify its economy
• 🚗 Norway incentivizes electric vehicle adoption to reduce oil consumption and enable higher exports
• 😎 Norway is displacing Russian market share as the EU's top supplier of oil, gas and potentially future renewables
• 🔋 Newly discovered mineral deposits may allow Norway to supply vital metals and rare earths to Europe as well
• 💰 Norway's oil fund owns 1.5% of global stocks - its future generations are set up for prosperity

Q & A

How did Norway's geography contribute to its early prosperity?

Norway's rugged geography made land transportation difficult but gave it an extensive coastline. This allowed maritime trade to flourish early on, enabling Norway to become a major lumber exporter and develop a strong merchant fleet and shipbuilding industry.

When did Norway discover offshore oil and gas?

In late 1969, the Phillips petroleum company discovered the Ekofisk oil field, one of the largest offshore oil fields ever found. This kicked off Norway's oil era in the 1970s.

How did Norway avoid the "resource curse" with its oil wealth?

Norway was already a stable democracy with decentralized wealth and power. It set up state-owned Equinor to give it control over its resources. In 1990 it established a sovereign wealth fund to invest oil profits abroad, avoiding economic over-reliance on oil.

Why is Norway such a major oil and gas exporter?

Its small population means low domestic energy needs. Its abundant renewable hydro and growing wind power meets most of its electricity needs, leaving more oil and gas to export. And its proximity to Europe provides ready export markets.

What is Norway's electric vehicle policy?

Norway offers generous tax incentives for its citizens to adopt electric vehicles. As a result, almost a third of vehicles in Norway are now EVs, reducing domestic oil demand further so more can be exported.

How did the Ukraine invasion benefit Norway economically?

As Europe imported less Russian energy after the invasion, Norway exported more oil and gas to replace it. Norway's 2022 energy export revenue doubled year-over-year to a record $131 billion.

How did Norway come to dominate phosphate reserves?

In 2023 a huge, world-leading phosphate deposit was discovered in Norway, instantly doubling global reserves. This undermines Morocco's previous dominance of phosphate vital for agriculture and batteries.

How could Norway undermine China's rare earth dominance?

The Norwegian phosphate discovery likely also contains large titanium and vanadium deposits. Europe relies heavily on China for these metals vital to high-tech manufacturing.

How does Norway use its oil wealth responsibly?

Norway caps withdrawals from its $1.2 trillion sovereign wealth fund at 3% yearly. This lets it keep growing to diversity away from oil dependency, while providing for 20% of Norway's annual budget.

Why does Norway have the potential to remain an energy superpower?

Climate change may increase Scandinavian precipitation and wind levels. Norway could not only export more renewable hydro and wind power, but replace even more Russian energy imports to Europe.