The oil price collapse and Norway's adjustment

Oil prices rose from around 10 US dollars a barrel in the late 1990s to above 100 dollars by 2013, then fell by more than half within about a year and a half, reaching roughly 70 dollars by December 2015, some 35 percent below the average for the first half of 2014. Norges Bank governor Øystein Olsen, addressing the shock directly in speeches in New York and at home, described how the price collapse forced a sharp pullback in petroleum-sector investment, Norway's single largest driver of mainland business investment, and pushed unemployment higher through 2015 and into 2016, concentrated heavily in oil-dependent regions such as Stavanger. Because a large share of Norway's current-account surplus and government revenue had been built on sustained high oil prices, the shock also narrowed the current account and slowed mainland GDP growth, even as the Government Pension Fund Global's foreign-currency value was partly cushioned by the weaker krone. Norges Bank responded by cutting its policy rate repeatedly through 2015, explicitly citing the need to support an economy adjusting to a structurally lower oil price rather than a temporary dip.