Norges Bank has voted most frequently on board-related matters. In November 2004, the Ministry of Finance approved new ethical guidelines for the Petroleum Fund’s investments. The ethical basis for the Petroleum Fund shall be promoted using the following three mechanisms: •  Corporate governance based on the UN Global Compact, the OECD Principles of Corporate Governance and the OECD Guidelines for Multinational Enterprises in order to promote long-term financial returns. •  Negative screening from the investment universe of companies that, either themselves or through entities they control, produce weapons whose normal use violates fundamental humanitarian principles. 3  Source: Kjell Gunnar Salvanes: “Omstilling og strukturelle endringer i det norske arbeidsmarkedet” (Adaptation and structural changes in the Norwegian labour market). Lecture at a conference arranged by the Norwegian School of Economics and Business Administration, the Norwegian Shipowners’ Association and the Foundation for Research in Economics and Business Administration in Oslo on 8 October 2004. BIS Review 21/2005  5  •  Exclusion of companies from the investment universe where there is an unacceptable risk of contributing, inter alia, to gross or systematic violations of human rights. The chart shows developments in both the average annual net real return and the real return without the contribution from active management. Returns have fluctuated considerably since the Petroleum Fund made its first investments in the equity markets in 1998. Since 1998, the first whole year the Petroleum Fund invested in equities, the annual excess return from active management has been 0.45 percentage point.

High prices for oil and gas and other export goods also contributed to an appreciation of the krone last year. Partly due to very high growth in demand for oil, the average oil price rose to almost 40 US dollars per barrel in 2004. Lately, the price has risen to more than 50 US dollars. Oil futures prices have also risen. Strong demand growth, particularly in the US and China, has resulted in high energy consumption. As a result of strong demand growth in 2004, excess global production capacity, which is largely controlled by OPEC, has now fallen to a low level. Consequently, small disturbances in supply or demand could have a relatively strong impact on oil prices. The Norwegian economy experienced a moderate recession in 2002 and the beginning of 2003. Since the first half of 2003, growth has again been high. It may appear that growth in the Norwegian economy has become more self-driven. In the early phase of the recovery, private consumption, traditional exports and fixed investment in the petroleum sector were the most important driving forces. In the last few years, household demand has been underpinned by low interest rates, high real wage growth and higher asset prices. Real wage growth was relatively high in 2004, although nominal wage growth was lower than it has been in several years. Higher imports from low-cost countries and intensified competition in a number of industries have kept inflation at a low level. These factors have led to brisk growth in household purchasing power.