Oil-rich countries are often known to use their petrodollars to splurge on wars or cementing the power of governing elites. Norway is an exception, with its vast oil wealth safely stashed in an overseas fund.
Norway has accumulated fabulous wealth due to its oil reserves
A visit to the oil museum in Stavanger, named one of Europe's cultural capitals this year, offers an insight into Norway's famed wealth. The museum tells the story of a poor fishing nation which in the 1960s stumbled upon oil and gas reserves on its shores and has since accumulated a fabulous fortune.
Since the discovery of oil, Norwegians have enjoyed one of the highest standards of living in the world and a generous social welfare system. Though the 4.6 million-strong Nordic country only has about 1 percent of the world's reserves, it has been able to sell about 90 percent of all the oil it finds, because its production methods are so efficient.
The Stavanger oil museum's director, Finn E. Krogh told German broadcaster NDR that the nation's biggest challenge is how to deal with the oil wealth.
"We have to administer the wealth with prudence. And we need more sustainability when we exploit oil resources," Krogh said.
Investing for the future
The Stavanger oil museum tells the story of Norway's wealth
Since 1996, Norway, a major oil and gas exporter, has been setting aside its oil revenues in an overseas global fund. The task of managing the country's oil wealth falls to the Government Pension Fund-Global (formerly known as the Government Petroleum Fund). It was set up the government in Oslo in 1990 and is invested almost entirely overseas to keep from overheating the Norwegian domestic economy.
"It's meant for the future so that we don't use up too much of our wealth," said Krogh. "It's right and I think those responsible for it have administered it prudently so far."
Norway's global oil fund so far has about 300 billion euros (about $440 billion). Only a fraction of it is invested in the domestic economy. The oil fund is meant to serve two broad goals -- maintaining the liquidity of Norway's economy in case oil reserves aren't as plentiful or oil prices fall steeply and stocking up funds for future generations.
Since 2001, Norwegian governments have allowed only 4 percent of the money earned from oil revenues to finance pension funds and state investments in the domestic economy.
Transparent and clean
Norway's central bank, Norges Bank, is responsible for administering the oil fund and its investments are subject to strict laws and a national ethics commission that monitors where the money is being invested.
For instance, two years ago, the commission ensured that the oil fund sold its shares in seven companies that were involved in producing components for nuclear weapons. Though the oil fund is meant to generate profits, transparency and "clean money" remain of paramount importance.
Harald Andreassen, chief economist of the Svedbank, told NDR it was vital to remember that oil alone wasn't responsible for Norway's affluence.
"We're a rich nation and we have a well-functioning labor market not just because of oil, but because we use new technologies, have passed major reforms and have modernized the economy," he said.
Norway remains the only oil-based economy that has created a thriving high-tech industrial base with US levels of productivity and a manufacturing base on a par with its European counterparts.
Norway healthy even without oil wealth
For now, Norway is still pumping tons of oil and its oil fund is growing robustly. Though some politicians routinely call for the fund to be cracked open to finance state projects, infrastructure and cut taxes, the national ethics commission makes sure the treasure trove remains untouched.
"If there was no more North Sea oil tomorrow, the oil fund would no longer grow and it would be a shock for industry dependent on oil," said Andreassen. "But Norway would still perform excellently."