s overall risk. such changes must be introduced over time. the owner ’ s most important investment strategy decision is the share of the fund ’ s capital that should be invested in equities. the size of the equity allocation has an impact on the recent research shows that the theory of purchasing power parity holds true to a greater extent than suggested by previous results. cf. : lucio sarno ( 2011 ) : purchasing parity in tradable goods, working paper for the ministry of finance report no. 15 ( 2010 – 2011 ) to the storting : the management of the government pension fund global in 2010 bis central bankers ’ speeches fund ’ s return and risk and has increased from zero in 1996, to 40 per cent in 1998 and to the current 60 per cent allocation adopted by the storting in 2007. the equity allocation was increased from 40 to 60 per cent in the period from june 2007 to june 2009. norges bank purchased nok 1 trillion in equities for the fund through the financial crisis, more than doubling the fund ’ s total equity holdings. the owner ’ s adherence to the strategy through the period of decline in equity prices will undoubtedly prove profitable over time. a maximum of 40 per cent of the fund is now invested in bonds and other fixed income instruments, which are usually associated with lower risk but also lower expected return than equities. earlier this year, norges bank advised the ministry of finance on the design of the benchmark index for fixed income investment. the strategic benchmark index should reflect the role fixed income investment is expected to play in the fund ’ s portfolio. fixed income investment should primarily contribute to reducing the fluctuations in the fund ’ s value. in addition, the fund should be exposed to credit premiums. the financial crisis taught us that different types of fixed income investments have very similar qualities when market liquidity declines. there are limited gains from holding a large number of diverse securities. norges bank therefore recommends simplifying the indices by substantially reducing the number of fixed income instruments. the most commonly used benchmark indices for bonds are market - weighted. borrowers are assigned weights according to the level of debt they hold. increased debt can reduce debt - servicing capacity. a market - weighted index is probably not the best approach for diversifying the risk of loss given default. norges bank has therefore proposed the use of gdp weights instead of market weights for government debt in the fund. under the fiscal rule, central government spending

of oil is now around usd 115 per barrel. prices for other commodities such as metals and food are also high. a weak dollar, low interest rates and an ample supply of liquidity may have contributed to the rise in prices. we have also recently seen that prices are being pushed up by political unrest in north africa and the middle east. nonetheless, strong growth in emerging economies and supply - side conditions have been the dominant factors in developments since the early 2000s. from 2000 to 2009 emerging economies accounted for 100 per cent of the growth in global consumption of primary energy sources. in the same period they accounted for 80 per cent of growth in global consumption of agricultural products and virtually all of the increase in global metal consumption. while demand for energy and commodities is rising, there are supply - side constraints. with regard to oil, the large and easily accessible deposits were extracted first, and new finds are smaller and more expensive to extract. the same applies to a number of metals. investment bis central bankers ’ speeches in the energy and commodity sector has also been low. energy prices have risen fairly markedly over a lengthy period, with some temporary disturbances. agriculture is facing some of the same challenges. productivity growth in this sector has declined in recent years. in order to increase production, farmers have had to use less fertile land and the costs of food production have risen. agricultural production has also become more energy - intensive and energy and food prices have become more closely linked. energy now accounts for a third of the cost of grain production. in addition, with high oil prices, demand has shifted towards biofuels, with inputs such as maize and sugar. in 2010, 40 per cent of maize production in the us was used to produce biofuel. a large share of sugar production in brazil is used for the same purpose. as we have seen in recent years, the rise in energy prices is spreading to food prices4. prices have also risen considerably over the past year as a result of poor crop yields in many parts of the world following storms and drought. our analyses of the outlook for the world economy and the norwegian economy are based on the assumption that oil prices will remain at the current level. it is difficult to predict future prices with any assertion. should oil prices show a marked decline, the oil fund mechanism will to a considerable extent shield the norwegian economy from the short - term negative consequences of a fall in oil revenues. however, our petroleum wealth will be reduced. on the other hand, should oil prices