Norway or Qatar: The More Sustainable Oil Economy

An analogy would be appropriate in comparing the planning-process of the economies of the

two countries, Norway and Qatar, around the natural gas resources that is available to them. It
is considered to be akin to consumer A and consumer B winning a bombastic lottery, with
consumer A prudently using the newly found resources to invest in stock portfolios, ensuring
a sustained generational income revenue, and consumer B indulging in ostentatious displays
of newly found wealth, not really worried about possible economic ramifications for the
upcoming generations. Norway and Qatar have both equally reaped the benefits of finding oil
reserves within their national territories and are one of the most economically sound countries
of the world. What is interesting is their vastly contrasting policies when it comes to utilizing
said reserves for economic prosperity. While one country has invested secure social welfare
and public infrastructure to secure citizen’s welfare for the long-run, another one, inebriated
under the false pretense of a sustained revenue from oil reserves, has indulged in building
lavish mega-cities that can stylistically compete with its western counterparts.

Post World-War II Norway, in the 1960’s, was an economy mainly based on fishing, with a
GDP equivalent in size to underdeveloped countries like Bangladesh and Nigeria. Modern
day Norway and Post War Norway are so utterly disparate that it is hard to comprehend the
mechanism of the economic boom that the country enjoyed in a relatively quick period of
time. In May of 1963, the Norwegian government asserted sovereign rights over the
Norwegian region of the North Sea, claiming any and all resources available within that
domain belonged to the people of Norway. Prima facie, this was to ensure fishing rights over
that region of Scandinavia, upon which Norway’s economy was highly dependent. In 1969, a
ship called the Ocean Viking struck oil in this particular part of the North Sea, and from that,
oil production in the region exploded, to the point that 1.6 million barrels of oil can be
excavated from the area per day. Ergo, in the mid 1970’s, Norway produced more oil per
capita than any other country in the world, around 313,000 barrels/PD/PMP, and even in the
present, it is only beaten in this vein by Kuwait, the United Arab Emirates, and the Kingdom
of Saudi Arabia.
Upon this most serendipitous discovery, the Norwegian government had the foresight to
preserve and prolong the revenues from these finite resources, realising the country would not
be ecstatic to return to fishing if the income from oil reserves were to dry up relatively
quickly. The oil boom caused Norway’s GDP to grow over 5 times in the 1970’s, from 12
billion to around 65 billion in this time period, but this new found wealth was not being
generated by private companies like Shell, Exxon, or British Petroleum, but rather by a
publicly owned and run company called Statoil. This resulted in profits from oil and natural
gas sales were not lining the pockets of private shareholders, but were transferred directly to
the government of Norway, consequently making the Norwegian government extremely
wealthy. At this point of deflection, the Norwegian government could have opted to go on a
public spending spree, building fancy cities and public infrastructure, in tandem with majorly
reducing taxes, as a convention followed by its Middle Eastern counterparts. This approach
would have been favoured tremendously by the citizens of the country, since short-term, it
means lesser taxes and a boosted quality of life. But the government opted out of such short-
term fiscal policies, with Norway still having some of the highest business and income taxes
in the world. In its stead, the government invested the money into the Sovereign Wealth
Fund, worth around $1.2 trillion, in fact, the largest of its kind in the world, comparable only
with China’s State Investment Corporation, which is interesting considering China’s
population is 270 times that of Norway’s population. This fund is legally owned by the
population of Norway, the rationale being since the resources used to generate these funds are
part of Norway’s public property, and hence, every single citizen of Norway has around
$200,000 invested for themselves in what can be considered to be a giant hedge fund.
Transparency, long-term planning, and a dedication to social welfare have been hallmarks of
Norway's management strategy for its oil wealth. The "resource curse," in which having
access to oil wealth causes corruption, inequality, and economic stagnation, has been avoided
by the government with caution. Instead, Norway has built a robust social safety net that
includes free public education, universal healthcare, and large unemployment compensation.
All of which has contributed to Norway being listed the number 5th happiest nation in the
world by the World Happiness Index.
Qatar, on the other hand, has taken a different approach to managing its oil wealth. Oil
revenue has been the key in turning the once desolate nation of the UAE into the universally
adored overconsuming metropolitan we know today. After 1971, post British Independence,
Qatar was a foundling nation bereft of a concrete line of action regarding management of a
kingdom in a rapidly changing world. It is the venture of joining the OPEC in the late 1960s
that caused the massive oil boom that the country experienced. OPEC was the driving force
that expediated Qatar into massively increasing its oil supply and actually start exporting it to
other countries. At this time, their biggest customers weren’t the UK or the USA who had
their fixed oil supply routes set at that time, but Japan which was albeit a rapidly growing
economy at that time but had very limited natural resources of its own. For a fledgling nation,
the government did employ this revenue stream into the education system, public
infrastructure such as ports and roads, oil refineries, and a sinewy healthcare system. This
reinvestment into infrastructure aided in further increase of profits from oil reserves, since
manufacture of any good requires a steady stream of the factors of production, including
capital and labour. Labour is Qatar’s biggest import, with just under 90% of the Qatari
population in current times being foreign workers. The UAE is one of the only countries in
the world where the native citizens of the country are a minority based on population size.

Every nation has a different strategy for dealing with the volatile nature of the commodity
that is oil, whose price and value fluctuates daily. And Qatar is betting on diversification of
its industrial portfolio for being its saving grace in the unholy case of a cessation of oil
revenues. The Qatari Emirs did not just invest in infrastructure that would enhance its oil
industry, but also in building hedonistic metropolis’ such as Abu Dhabi, one that could satiate
the wander lust of every roving mind in the world, and could just about compete with the
tourism industry model enjoyed by its neighbour, Saudi Arabia. The impetus for this is
simply to convert tourism into its second most lucrative industry, with Qatar also spending an
obscene amount of money into hosting the 2022 FIFA World Cup, all in an effort to attract
more tourism into the country. Qatar's approach to managing its oil wealth has been criticized
for its lack of transparency and accountability. Concerns have been raised over the treatment
of migrant workers, and the nation has been accused of using forced labour to construct the
World Cup infrastructure. The administration has also come under fire for its record on
human rights and its backing of extremist organisations.

In conclusion, Norway and Qatar have managed their oil resources in quite different ways.
Qatar has concentrated on developing infrastructure and making investments in foreign
assets, whereas Norway has used its oil revenues to build a robust social safety net and avoid
the "resource curse." Although each strategy has benefits and drawbacks, most people believe
Norway's strategy to be more responsible and sustainable, with Norway being considered a
model in the management of oil reserves. And Qatar’s bet on its tourism industry being a
contended replacement for its oil reserves is a question that will be a point to be pondered
upon by many economists in the future.