New political signals from the US can have a major impact on Norway’s economy over the next four years with Donald Trump back in the White House. His calls for the US oil industry to “drill, baby, drill,” just after the Norwegian government issued new oil exploration licenses of its own last week, can also extend Norway’s oil era but with lower returns.
“Trump is sending very strong signals about the plans for US energy policy,” Kyrre M Knudsen, chief economist at Sparebank1, told news bureau NTB after Trump was sworn in as US president this week. “That’s one of the areas where he can directly affect the economy’s ability to grow.”
Knudsen noted that “cheap energy is good for the American economy,” since it can spur growth and cut costs. Cheaper oil can also be possible if Trump continues to ignore and even scoff at calls for carbon emission cuts and sustainability. Drilling for and ultimately producing more oil and gas would boost supply and lower prices, but that means Norway would also earn less on its own oil and energy exports.
It could nonetheless extend the oil era, in Norway as well, slowing the transition away from fossil fuels and towards emission reduction. That seriously worries climate and environmental activists who think Norway is already moving too slowly in phasing out its oil production.
As many demonstrated outside an annual oil conference in Sandeford last week, the Norwegian government offered 53 new drilling licenses to 20 companies for more oil and gas exploration: 33 in the North Sea, 19 in the Norwegian Sea and one in the Barents Sea. Arctic drilling is especially controversial and newspaper Dagens Næringsliv (DN) reported that the single license in the Barents region is the lowest in nearly 20 years, and can indicate that few companies applied to search for undersea oil and gas reserves on the blocks offered.
Current exploration activity remains high in the Barents, however, and Energy Minister Terje Aasland said the Norwegian government intends to expand the exploration area by 76 blocks where oil companies can apply for drilling licenses. He largely ignored the demonstrators outside who included Swedish activist Greta Thunberg and many representing the organization Extinction Rebellion.
The leader of Norway’s Greens Party, Arild Hermstad, was also critical to the ongoing exploration for oil and gas, claiming that the government has no credible climate policy and doesn’t seem to care about climate change effects like recent flooding, global warming or the fires in California. Aasland defended the new licensing round, claiming the Norwegian government imposes strict demands on the oil and gas industry to reduce emissions from production, invest in carbon capture and storage solution, and use new technology to lessen environmental impact.
There’s still strong demand for both oil and gas, with Norway’s large Troll field contributing to more record gas production last year, most of which was exported via pipelines to Europe and Great Britain. Europe has especially needed Norway’s gas after Russian gas supplies were rejected in response to Russia’s invasion of Ukraine. State oil and energy company Equinor reported that Troll, Norway’s biggest gas field, has never produced more gas than it did in 2024 because of demand from Europe, high and stable production and little down-time, also at other fields.
DN reported this week, meanwhile, that gas prices have risen by more than 65 percent despite the record production because of pressure on the gas market caused by both weather challenges and the absence of Russian gas. Analysts expect the market pressure to continue, raising concerns of shortages if temperatures fall and gas demand rises further. “If it gets cold now, we can have a crisis,” trader Tor Svelland told DN, warning that gas storage supplies could be emptied within a few weeks. That would boost the need for more liquified natural gas (LNG) to be shipped in.
If Trump follows through on his claims that he can quickly end Russia’s war on Ukraine, the gas market could suddenly have more than ample supplies, also if he succeeds with his oil drilling campaign. Then supply could soar and prices fall, making also Norway’s oil and gas industry less lucrative and, ultimately, replaced by alternative energy projects.
NewsinEnglish.no/Nina Berglund