Tangen warns Norway’s oil fund could disappear

Norway’s oil fund could disappear under certain circumstances, its chief executive Nicolai Tangen warned at Arendalsuka on Tuesday, Dagbladet reported.

Tangen said he could not rule out the entire fund, worth more than 22,000 billion kroner, disappearing. He opened this year’s finance speech at Kulturhuset in Arendal under the title “The oil fund could disappear, and it is more likely than we like to believe.”

He said Norwegians had become accustomed to almost a quarter of the national budget coming from the fund’s annual returns. The amount is roughly equivalent to Norway’s spending on all its hospitals, the entire national insurance system, transport, higher education and research combined, Tangen said.

“Can the oil fund disappear? The answer is yes. And the worst thing is that, in the world we live in now, that is not entirely unlikely,” Tangen said.

He referred to the stock market crash of 1929, which triggered the Great Depression in the following decade, and asked what would happen to the fund in a similar crisis.

“In a somewhat simplified way, naturally, we can assume that at least 80 per cent of the value of our shares would disappear. At least,” Tangen said.

The fund currently consists of 70 per cent equities. If equity values fell by 80 per cent, the fund would be worth less than 10,000 billion kroner, he said.

Under Norway’s fiscal rule, which permits the government to withdraw 3 per cent of the fund annually, that would halve the yearly withdrawal to 300 billion kroner.

“Then we could remove the entire defence budget and all the hospitals in Norway,” Tangen said.