complacency. the profits from petroleum activities have nevertheless been substantial. most of the economic rent has flowed into government coffers via the special taxation of oil production. but wages in oil production and oil services have also been relatively high. the statoil ( 2015 ) : press release of 9 december 2015. bis central bankers ’ speeches rise in input prices and investment in the petroleum industry have been significantly higher than for other industries. the excess costs have reduced the economic rent. at today ’ s oil price, it seems that virtually none of the new field developments planned on the norwegian shelf can be realised at a profit. but cost calculations may change. oil prices are not the only prices trending downwards. the cost level on the norwegian shelf is also drifting down. this is perhaps best illustrated by developments in rig rates. the rates followed oil prices upwards, but have fallen in recent months. at the same time, oil companies are slashing costs. the development of the johan sverdrup field is now profitable even at oil prices around usd 30 per barrel. for the castberg field development in the barents sea, the breakeven price has been reduced from more than usd 80 to below usd 45 per barrel. 3 norway ’ s oil age is not over. proven crude oil reserves are larger today than 10 years ago despite substantial sales over the period. 4 our gas resources are even larger. so far, only a third of the estimated exploitable norwegian gas resources have been produced. 5 oil and gas prices will to a large extent determine the quantity that will be extracted. that is something we can do little about. what we can do is to optimise production efficiency on the norwegian shelf as far as possible. there is still potential in this respect. increased productivity and lower costs in the oil industry will contribute to sustaining activity on the norwegian shelf, which will also benefit the oil service industry. the economic rent should benefit society as far as possible. statoil ( 2016 ) : results for fourth quarter 2015 and capital market update 2016. norwegian petroleum directorate ( 2015 ) : evaluation of reserve growth for oil – 2005 – 2014. norwegian petroleum directorate and ministry of petroleum and energy : www. norskpetroleum. no. bis central bankers ’ speeches employment has been high in norway for many years. compared with other countries, unemployment has been low. in the competition for labour resources, oil production and oil service companies drew the longest straw. the situation has now changed.

unemployment is on the rise. norway ’ s oil regions, which have long reaped the benefits of the upswing, are now struggling. the downswing is proving painful for many. but the situation is far different from the adverse conditions that prevailed in the 1980s, which resulted in a deep economic crisis in norway. but unemployment must be expected to be higher than we have been accustomed to in recent years. closing a business takes less time than developing a new one. restructuring takes time. restructuring must start in the business sector. economic policy can only help set the stage. monetary policy can facilitate the restructuring process by supporting a weaker krone exchange rate and thereby expedite adaptation to a lower cost level. in addition, reduced interest expenses will contribute to income growth for many households. there is still room for manoeuvre in monetary policy. when unemployment rises, as is the case today, it may be appropriate to use the fiscal space available. we must avoid a self - reinforcing decline in output and employment and hence a decline that is more pronounced than necessary. but an increase in the spending of petroleum revenues should primarily be used to finance temporary measures that are easy to reverse. fiscal policy must also take into consideration that lower oil prices will reduce the government ’ s spending capacity in the longer term. in recent years, we have sold large volumes of oil and gas at good prices. the transfers to the government ’ s savings account have been substantial. the picture is now quite different. if oil prices remain at today ’ s level, government revenues will fall sharply. the present value of future income can in that case be estimated at a fourth of today ’ s oil fund, the government bis central bankers ’ speeches pension fund global ( gpfg ). 6 that means that most of the government ’ s petroleum wealth may already have been deposited in the gpfg. the year 2015 may stand as the last year of net transfers to the gpfg. already when the budget for 2016 was presented, there were prospects that the spending of oil revenues would exceed actual income from petroleum activities. the estimate is based on impact calculations in the national budget for 2016 ( page 31 ) based on a long - term oil price of nok 400 per barrel at constant 2016 nok. bis central bankers ’ speeches at today ’ s oil price, it may be necessary to use about nok 80 billion of the gpfg ’ s return to finance the structural non - oil budget deficit. 7