Last year, the state received only NOK 107 billion in revenue from its oil business. This has been reduced by half compared to the previous year.
For those earning income from the oil business, prices fluctuate greatly. The Ministry of Finance took note of this last year.
High Data released by Statistics Norway on Thursday showed that the state’s net cash flow from oil operations last year was only NOK 106.8 billion. This is the lowest income since 1999.
Last year, the state’s oil revenue fell sharply from approximately 250 billion Norwegian kroner per year in the previous two years. Most of the years since 2000, incomes have been much higher. 2008 was the year with the highest oil revenue, with net oil revenue of NOK 416 billion.
The state’s net cash flow from oil comes from four sources: taxes on oil companies, taxes on the state’s direct involvement in oil extraction, taxes and dividends from Equinor.
The explosion came from the first two sources of income. Taxes on oil companies are by far the most important tax. The state’s tax revenue dropped from NOK 134 billion in 2019 to NOK 28 billion last year.
The pandemic and economic downturn led to a sharp drop in oil prices last year. The average price is $43 per piece. The price of Brent blended oil per barrel last year was US$64 per barrel. Data from consulting firm Rystad Energy shows the price of oil per barrel in 2019. Calculated in Norwegian kroner, the decline was slightly smaller.
Fortunately, the sharp decline in income does not mean that the country must reduce its spending accordingly.
Quite the opposite: Last year, the state significantly increased spending in response to the economic consequences of the pandemic. Oil funds plummeted.
In December 2020, the Parliament made a final adjustment to the 2020 budget. Income and expenses have been updated. The Parliament subsequently made an update on the actual use of oil money.
In view of the recent estimates of revenue and expenditure at the end of the year, Parliament adopted petroleum money in December each year with the aim of bringing the national budget to zero. Oil money just fills the gap between expenditure and income.
In December of last year, the Parliament decided that the oil funding needed for 2020 would be close to 417 billion Norwegian kroner.
However, the decision on the state’s revenue and expenditures made on Thursday showed that the plan was too hard and it decided to withdraw too much money from the oil fund. By 2020, the profit of the central government will reach 47 billion Norwegian kroner. Ideally, the profit should be zero.
The money was deposited by the Ministry of Finance into its current account with Norges Bank for future use.