Why Norway is Becoming the World's Richest Country

Norway is a sparsely populated country with a population of about 5.2 million, smaller than many city-states like Singapore and Hong Kong. Despite its small population, it has a large land area, approximately 385,000 square kilometers, which is significantly larger than countries like Singapore and Hong Kong. The country's geography is predominantly mountainous and cold, with a short growing season, making it unsuitable for large-scale agriculture. Only 2.2% of its land is arable, which is one of the lowest percentages globally. This has historically led to the perception of Norway as a poor country until the discovery of oil in the 1960s. However, Norway has been relatively wealthy due to its maritime culture, extensive coastline, and lumber resources, which were accessible through its fjords.

Historically, Norway's fjords allowed for a maritime culture and easy access to the ocean, despite the challenging terrain. This facilitated the development of a lumber industry, which was a significant economic driver until the 19th century. The country's decentralized population led to a common identity and cooperative efforts in shipbuilding, which influenced the economy for centuries. By the 20th century, Norway had the fourth-largest merchant fleet globally. The development of hydroelectric power in the early 20th century provided a significant economic boost, enabling rapid industrialization and electrification. By 1920, Norway's electricity consumption per capita was the highest in the world, and the country became a major producer of refined aluminum, with Norsk Hydro emerging as a global player.

Norway's industrialization was furthered by the gradual nationalization of its hydroelectric power industry. The government established rules for foreign investors, ensuring that power stations and mines would be turned over to the Norwegian government after 60 to 80 years of operation. This approach allowed foreign investment while securing long-term control for Norway. Over 90% of Norway's hydro capacity is publicly owned today. This strategy was later applied to the oil and gas industry, with the establishment of the state-owned company, initially called Statoil. The company was designed to maintain a majority ownership stake in all production licenses, ensuring Norwegian control over its resources.

The discovery of the Ekofisk field in 1969 marked the beginning of Norway's oil boom. The country applied lessons from its hydro industry to the oil and gas sector, creating a state-owned company, Statoil (now Equinor), and mandating that it hold over 50% ownership in all production licenses. This attracted foreign investment while providing valuable experience for Statoil. Norway's oil and gas reserves and production levels, while significant, are surpassed by other countries. However, its strategic policies, small population, and proximity to the EU market have made it a leading exporter of oil and gas. The country's hydro and wind resources are used domestically, allowing Norway to sell most of its oil and gas abroad, contributing to its wealth and energy independence.

After experiencing an oil-induced recession in the 1980s, Norway established the Government Pension Fund Global (the Oil Fund) in 1990. This sovereign wealth fund invests surplus revenues from oil and gas into global stock markets and real estate. Strict rules limit withdrawals to 3% annually, ensuring the fund's growth and preventing misuse by politicians. The fund has grown to be the world's largest, with assets exceeding $1.2 trillion, and provides a significant portion of the Norwegian government's annual budget. This strategy has allowed Norway to maintain a stable economy and avoid the pitfalls common to petrostates.

Norway's oil and gas industry has seen substantial revenue growth due to increased demand from the EU following the reduction of Russian imports. In 2022 and 2023, Norway's oil and gas revenue surged to unprecedented levels, providing a financial boon for the country. This revenue has been wisely invested into the sovereign wealth fund and used to explore for further untapped resources. Norway's growing role as an energy supplier to the EU is expected to continue, with potential expansion into renewable energy exports as climate change progresses and renewable energy sources become more critical.

Norway's push towards renewable energy and the discovery of vast phosphate reserves present new opportunities for the country. With increased precipitation levels expected due to climate change, Norway is well-positioned to expand its hydroelectric power capabilities. The country's wind potential is also significant, and the recent discovery of large phosphate reserves has the potential to make Norway a major global supplier. Additionally, the presence of metals like titanium and vanadium in these reserves could reduce Europe's reliance on China for these critical materials, enhancing the continent's strategic autonomy.

Norway's strategic management of its resources, commitment to renewable energy, and recent discoveries position it as a significant player on the global stage. The country's approach to resource management has allowed it to maintain a stable and prosperous economy while reducing its reliance on fossil fuels. As Europe and the Western world increasingly prioritize green energy and technology, Norway's resources will likely become even more valuable. The country's ability to supply rare earth materials and renewable energy, along with its established oil and gas exports, ensures its continued economic growth and influence in the global market.