OSLO, Norway — While much of Europe is pinching pennies to pay its way out of the debt crisis, Norway has been awash with cash and is set to get more. Two major oil finds are revitalizing the country's aging energy sector and promise to buoy it through the downturn looming over the global economy.
Although headlines this summer have been predicting economic gloom — a flare-up in Europe's debt problems, falling bank stocks, another recession in the U.S. — Norway has weathered the bad news.
In fact, one of its main financial concerns is how to keep all its money from overheating the economy.
"In Norway, we live in a big bubble, independent of what happens in the rest of the world," said Beniamin Johansen, a personnel consultant in Oslo.
Recognized by the U.N. as the world's best country to live in, the land of breathtaking fjords and majestic mountains has used years of oil income wisely to keep unemployment low, incomes high, education free and health services working. The society is also enviably tolerant, as reflected by the inspiring national response of moderation to extreme rightist Anders Behring Breivik's mass killing spree last month.
For a decade, however, Norway's North Sea oil production has been sliding as the wells slowly run dry. Companies have increasingly had to explore further north, in harsh Arctic conditions, to get to new reserves.
So this summer's discovery that two North Sea oil fields are substantially bigger than previously thought was as unexpected as it was welcome.
The find, announced in July, potentially raises the country's daily crude output of 1.7 million barrels by as much as 300,000 barrels. That's a bonanza at a time of high oil prices that are likely to increase even more and pushes back predictions of when the North Sea will stop yielding crude.
No wonder industry officials are ecstatic.
Announcing the "giant" find, Tim Dodson, vice president of exploration at Norway's Statoil exulted that "Norway has not seen a similar oil discovery since the mid 80's."
In bookkeepers' terms, the industry has accounted for value creation — revenue that exceeds expenses — of nearly $930 billion since the 1970s, and future good times appear certain with the additional supplies beneath Norway's part of the North Sea floor.
The country's main challenge has been managing the oil wealth and keeping it from overheating the economy of the tiny country of 5 million people.
After financing welfare programs that are the envy of the rest of Europe, the Norwegian government still has so much money that it is forced to invest it outside the country for fear of creating bubbles in the domestic financial and real estate markets.
The country's $550 billion sovereign wealth fund, set up in 1996, owns through its investments some 1.9 percent of the European stock market and holds about 1 percent of traded global shares.
But despite the government's efforts to protect the economy from bubbles, the national wealth has created unbalances that are difficult on Norwegians not involved in the oil sector.
With virtually no unemployment, wages are high — the average salary equals almost $7,000 a month. That, and a strong currency are backfiring on industrial workers as companies consider moving to cheaper countries or outsource production to nations like India, which already has major IT contracts with dozens of Norwegian companies.
"Our competitiveness has been weakened year by year during the last decade," says Tor Steig, from the Confederation of Norwegian Enterprise. Other experts note that spending oil money on health services, housing and expanding the public sector creates a bigger work force that — while ensuring that standards remain high — does not directly contribute to the nation's productivity.
And the prosperity that comes with oil has a high price tag. A recent survey by the Swiss bank UBS, ranked the capital, Oslo, as the most expensive city in the world.
Many Norwegians near the border with Sweden cross regularly to their eastern neighbor — itself one of Europe's most expensive countries — to stock up on food, alcohol and tobacco at prices often 40 percent lower than at home.
McDonalds' signature Big Mac burger costs the equivalent of $5.79 in Norway compared with $3.54 in the United States and an average of $4.38 in the European Union, according to the Economist's worldwide Big Mac index that uses the price of that fast-food item as one measure of prosperity.
Still, Norway's oil riches to some extent trickle through the economy, which is largely built around the one sector. And as the oil wealth fund keeps growing, it provides a valuable backstop for the economy.
During the 2008 global downturn, it proved to be a lifesaver, with the government providing billions in extra funds for public building projects and helping keep the wheels of the country's economy turning. The authorities also secured liquidity for Norwegian banks and provided targeted tax breaks — estimated at a total of $1.3 billion — over two years for companies with deficits.
The country is not totally impervious to the economic turmoil in Europe. Any major stock tumble would hit the oil fund, shrinking Norway's fortune. Also, renewed global recession would hurt Norway's export driven industry and could drive down oil prices, further slashing revenues.
For now, though, those prospects do not appear to worry Norwegians, who seem to be exempt from the economic pessimism choking off consumer spending elsewhere in Europe.
Anniken Baronsen, the manager for a jewelry store on the outskirts of Oslo, says sales have grown between 5-8 percent this year compared with a year earlier.
"People have the money," she said.
Jahn reported from Vienna. Matti Huuhtanen in Helsinki contributed to this report.