Spillover-effects from the offshore petroleum to the mainland economy

The demands from the petroleum industry for goods and services to investments and intermediate consumption of operations are met by direct and indirect supplies from different Norwegian industries and to a large, but lesser degree by direct and indirect imports. This report documents our calculations of how much of the deliveries to the petroleum industry is supplied by other domestic industries and how much is imported. We make a distinction between direct and indirect deliveries, and between their use for investments and for intermediate consumption of operations.

The bases for our calculations are input-output tables based on figures from the Norwegian national accounts. The tables show deliveries between industries (input) and the production (output) of each industry. We have estimated the share of the value added in each industry that can be linked to deliveries to the petroleum industry, and the fractions of the total demand from the petroleum industry that those share constitute. Assuming proportionality between production and labor, we have also estimated the number of workers that are linked to the deliveries to the petroleum industry.

In 2013 about 18 percent of the petroleum industry’s demand for investment goods was imported directly, while domestic companies supplied the rest. The original demand from the petroleum industry generated a recursive chain of indirect deliveries from imports and domestic suppliers. Among these repercussions, deliveries from domestic suppliers and subsuppliers are of interest, in particular the value added – the gross product – and the employment this production gives rise to.

Our input-output calculations show that in excess of 230 000 workers could be linked to the petroleum industry. A minority of the workers was employed in the industry itself, while a majority was employed in other industries supplying goods and services to the petroleum industry. In every supplying industry, workers were assumed to be linked to the petroleum industry in proportion to the share of the gross product delivered to the petroleum industry. The resulting petroleum-related employment summed up to 8.7 percent of the total employment in Norway in 2013.

Based on our input-output calculations we can also estimate that the employment related to the petroleum industry decreased from 230 000 in 2013 to 205 000 in 2015. This reduction in the number of employed individuals linked to the petroleum industry – due to reduced investments in the industry – is about the same as the increase in the number of unemployed individuals in Norway in the period. Correspondingly, the employment rate fell from 8.7 percent to 7.5 percent from 2013 to 2015.

Our analysis quantifies effects of changes in the demand from the petroleum industry by identifying supplying industries and their share of the deliveries. This amounts to only a part of the overall effects of the petroleum industry on the Norwegian economy. Spillover effects from additional income to households and authorities, and their macroeconomic consequences, are not included in our analysis. Neither are effects through the labour market and wage-price formations.

Without the demand from the petroleum industry, some supplying industries would to some degree been able to turn towards other markets.

Our methodical approach and exposition draw on Prestmo et al. (2015), which facilitate a comparison with the results in Prestmo et al. (2015). Our estimated deliveries are about the same as in Prestmo et al. (2015).