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 shares 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 2015 about 21 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 2015 there were about 195 000 employed workers who could be linked to the petroleum industry. Of these, a minority was employed in the petroleum industry, while a majority was employed in other industries that delivered goods or services to the petroleum industry either directly or indirectly. 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 amounted to 7.1 per cent of total employment in 2015.

Based on our input-output calculations we can also estimate that the employment related to the petroleum industry decreased from 195 000 in 2015 to 170 200 in 2015. The decline in the petroleum industry has led to a drop in petroleum-related employment from 7.1 percent of total employment by 2015 to 6.1 per cent in 2017. This is in line with the decline in employment from 2013 to 2015, cf. Hungnes et al. (2016).

Our study analyzes the effects of changes in demand from the petroleum industry by identifying which industries are responsible for deliveries to the petroleum industry. It is not the same as the impact of the petroleum industry on the Norwegian economy. Ripple effects from household and government revenue from the petroleum activity, as well as the macroeconomic effects of these ripple effects, have not been analyzed here. Impacts related to the activity of supplier industries in the labor market and price formation are also not included in the analysis. Without demand from the petroleum industry, supplier companies could somehow turn to other markets.

Both calculation method and presentation in this report are based on Prestmo et al. (2015) and Hungnes et al. (2016). This means that the results can be compared to the corresponding findings in the two previously mentioned reports.