The old song is right; “The Times They are a Changing.” The world’s wealth fund; which was built with oil money might get out of oil and gas stocks because they are too risky.
The managers of Norway’s $1 trillion national wealth fund want to sell off $40 billion worth of oil and gas stocks; such as Exxon-Mobil (NYSE: XOM), and Royal Dutch Shell (NYSE: RDS), Bloomberg Markets reported. The fund; controlled by Norway’s Finance Ministry, invests offshore oil profits on behalf of the people of the Kingdom.
This is a huge deal because the fund might control as much as 1.5% of the world’s stock market, Bloomberg estimated. The plan is only being considered right now but it might be implemented as soon as 2018.
The fund already made one sea change by selling off most of its coal stocks to avoid climate risk. This should concern us because Saudi Arabia which has, even more, oil money than Norway might do the same.
The Oil Free Future is Almost Here
Part of the reason for the proposal is risk avoidance; because around one-fifth of Norway’s gross domestic product comes from oil money. The hope is to keep generating enough income to keep Norway’s welfare state going into an oil-free future.
Demand for oil might fall with the growing use of electric vehicles and efforts to ban the internal combustion engine. Strangely enough, Norway is one of the countries doing that. The Kingdom’s government has a plan to make gas vehicles obsolete by 2025, The Drive reported. A big reason for oil-stock divestiture is to generate funds to help all the oil workers adjust to the post-oil economy.
That plan is motivated by national security and economic concerns as well as environmental worries. Converting to electric cars means Norway would have more oil to export to make more money on the market. Electricity is easier to produce and less vulnerable to enemy attack than offshore fields. All it would take is one cruiser’s big guns to destroy all the oil rigs in the North Sea.
Those developments will be beneficial but they will be disruptive and might kill lots of jobs by eliminating gas stations. That means there will be no need to hire a high school dropout to stand behind the cash register to sell cigarettes and lottery tickets. In other words; another safe but low-paying and low-prestige job for working stiffs might soon disappear.
America Should Emulate Norway’s Wealth Fund
Norway’s oil fund might be a good model for the United States. One way to raise money for needs like Social Security, Basic Income, and Medicare would be to tax large corporations like Alphabet (NASDAQ: GOOG), Oracle (NYSE: ORAC), and Amazon (NASDAQ: AMZN) then use the proceeds to buy their stock. The profit from the stock would then be reused to finance social programs.
This would be a better model than the current 401K and IRA (individual retirement account) nightmare facing average Americans because the government would assume the risks. Many Americans are facing a retirement with only Social Security because the IRA is empty. Such a fund would ensure that the profits would be distributed to all citizens and not just the billionaire class.
The problem would be getting the corporate haters on the left and the government haters on the right to go along with it. Hopefully, our leaders will have the brains to look at solutions like the one in Norway.