Investment booms in an oil economy - the Norwegian case

Abstract

This paper discuss medium term effects on the Norwegian economy of alternative investment profiles in the petroleum sector. Following a brief discussion of the relevance of theories of optimal extraction we present three alternative profiles that stress different views on the relation between the petroleum sector and the rest of the economy. These profiles are based on "engineering-information" on each oil and gas field with regard to the commodity composition of each investment project. The economic effects of each profile are then analyzed by means of an input-output based econometric model of the Norwegian economy. The need for considering macroeconomic consequences of different investment profiles both on company and government levels is stressed.