Effects of Higher Oil Prices on the Norwegian Economy
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Oil prices have risen markedly in recent years. An oil price increase affects the Norwegian economy through various different channels. Some sectors will experience increased demand, while others will be affected mainly through higher costs. Given limited idle resources in the economy, increased activity in one sector will divert resources away from other sectors. Although higher oil prices will boost Norway’s national wealth, it is therefore not a given that the net effect will be an increase in mainland GDP in the short term. It is conceivable that activity will fall even if wealth rises. In practice, however, we find a positive relationship for Norway.