This indicates that the system to keep cash flows from the petroleum sector outside the Norwegian economy functions effectively in that the system has won credibility in financial markets. This is another positive result. Since summer 2004, there has nevertheless been a somewhat stronger correlation between the krone and the oil price. A number of factors may have played a role here: There have been expectations that oil prices will remain high for several years. And considerable petroleum revenues have been circulating in the Norwegian economy, partly as a result of government spending and partly due to the high level of petroleum sector investment. In the elaboration of economic policy in the national budgets, long-term considerations are always discussed when making decisions about the spending of petroleum revenues. Two considerations are of particular importance: The aim of equitable distribution across generations and an industry structure that will in future provide us with solid revenue sources other than petroleum activities. The fiscal rule for the smooth phasing-in of petroleum revenues, which is designed to safeguard such considerations,  3  Thorvaldur Gylfason, Natural Resources and Economic Growth: From Dependence to Diversification. Discussion paper No. 4804, CEPR  4  See for example Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-States. University of California Press 1997. 5  See for example:J.M. Davis, R. Ossowski, J. Daniel and S. Barnett, Stabilization and Savings Funds for Non-renewable Resources: Experience and Policy Implications. Occasional paper 205, IMF 2001. J.M. Davis, R. Ossowski and A. Fedelino (eds.

), Fiscal policy Implementation in Oil-Producing Countries. IMF 2003 J. Wakeman-Linn, C. Aturupane, S. Danninger, K. Gvenetadze, N. Hobdari and E. Le Borgne, Managing Oil Wealth: The Case of Azerbaijan. IMF 2004 World Bank report No. 32700-TP: Country Assistance Strategy for Timor Leste. 2/8  was introduced in 2001. According to the rule, only the expected real return on the Fund is to be used. The rule has functioned as a budget guideline. Effects on the Norwegian economy The question may be asked as to which effects we can observe of petroleum revenue spending in the domestic economy. The risk of “Dutch disease”6 has been a common reference in the discussion on petroleum revenue spending. The Dutch disease occurs if spending is so high that the basis for internationally exposed industries is eroded and fluctuations in economic activity are amplified. As mentioned, in 1970s and 1980s there were clear symptoms of contamination. Norway’s fixed exchange rate policy in the years from 1986 to 1992 drove high inflation out of the economy, however. Our inflation targeting regime will achieve the same objective. It appears that the economy has again become more stable. And the fiscal rule has contributed to this. This is then a third positive result. Shifts in industry structure, with higher growth in sheltered industries, are a feature common to all developed countries. But, it may seem that this shift has occurred slightly faster in Norway than, for instance, among our Nordic neighbours. The changes have also been fairly considerable after 2002.