market the imf has analysed supply and demand in the oil market for the period ahead in the latest issue of “ world economic outlook ”, published in april of this year. assuming an annual global gdp growth of approximately 3 per cent and an oil price in line with market expectations in february 2005, 1 demand for oil is expected to increase by around 2 per cent per year until 2030. price expectations are higher now, but according to imf calculations, the demand for oil in the long - term reacts relatively little to price changes. the growth in demand primarily reflects higher demand for fuel for motor vehicles, particularly in non - oecd countries. an increase in per capita income in china will in particular lead to a sharp increase in car use. output in non - opec countries will peak in the not - too - distant future – in 5 years, according to imf estimates. higher demand will require higher output in opec countries. these countries have substantial oil resources but are currently producing close to capacity. production capacity must therefore be increased. higher demand can thereby be met by non - opec oil producers operating at full capacity while opec passively satisfies any remaining demand by increasing its production capacity. alternatively, opec can take a more active position and push up oil prices even further by restraining production. not many years ago, it was normal to assume that the long - term price of oil was around usd 20 to usd 25 ( in real value ) per barrel. analyses such as the one presented by the imf suggest that the long - term oil price level may be considerably higher than this. an average of usd 45 per barrel in 2005 and falling to usd 34 per barrel in 2010 and the years following. as a result of persistently high oil prices and expectations that oil prices will remain high, investment in the petroleum sector may reach record levels this year. the investment intentions survey for the petroleum sector points to very high growth. the level is expected to remain high throughout the projection period. activity in the petroleum sector will have spillover effects on the mainland economy, initially on the shipbuilding industry and the building and construction sector. the scale of petroleum investment and its spillover effects are highly uncertain. the last time petroleum investment showed a sharp increase, in 1997 / 1998, growth was substantially stronger than had been assumed. at the same time, the rest of the norwegian economy was experiencing an upturn. the unexpected increase in petroleum investment contributed to an economic upturn that

jarle bergo : cyclical developments, monetary policy and the krone exchange rate speech by mr jarle bergo, deputy governor of norges bank ( central bank of norway ), at østfold university college, sarpsborg, 28 september 2006. the text below may differ slightly from the actual presentation. the speech is based on the assessments presented at norges bank ’ s press conference following the executive board ’ s monetary policy meeting on 27 september, inflation report 2 / 06 and previous speeches. * * * cyclical developments the cyclical upturn in the norwegian economy continues. growth has been strong since mid - 2003. real income growth has been solid in both the household and corporate sectors. household demand, which spurred the recovery, is still on the rise. many norwegian export companies are operating at full capacity with solid profit margins. high prices for norway ’ s export goods have contributed to a strong improvement in norway ’ s terms of trade. at the same time, there is solid growth in general government demand for goods and services. fixed investment has gradually become an important driving force behind the economic upturn. over the past couple of years, increased mainland business investment has contributed to the upturn in the norwegian economy. corporate profitability is high and companies are positive about the outlook ahead. the order book situation in manufacturing is highly satisfactory, and optimism appears to be high in most business sectors. according to our regional network, the market situation is also positive for corporate services. petroleum investment has reached a high level after three years of strong growth. the large ormen lange and snøhvit projects have contributed to the growth in investment. high oil prices led to buoyant activity even at fields that have been in production for a long period. investment activity is also expected to remain high after the large development projects are phased out. information from the regional network suggests that petroleum investment is generating considerable impulses to activity in norway ’ s coastal regions. according to the network, suppliers to the petroleum industry are expecting sustained strong growth over the next few months. activity in the housing market appears to be buoyant again in 2006. in the past two years, housing investment has risen to a very high level. in 2005, the number of housing starts was the highest since the beginning of the 1980s. over the past six months, signs of labour market tightening have come into increasing evidence. employment has accelerated and unemployment is falling rapidly. it appears that wage growth will be somewhat higher