Spillover-effects from the offshore petroleum to the mainland economy

This report documents our calculations of how much of the deliveries to the petroleum industry are 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 starting point for our calculations is 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 2018, the petroleum industry's resource use in the form of investments, product efforts and wage costs amounted to 8.5 per cent of mainland Norway's GDP. But part of the investments and product efforts are delivered directly from abroad. In addition, Norwegian suppliers or their sub-suppliers will use imported product input. When we take these "import leaks" into account, the importance of the petroleum industry's resource use will be reduced.

In 2018 about 23 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 sub-suppliers are of interest, in particular the value added – the gross product – and the employment to which this production gives rise. Imports from sub-suppliers make up about 22 per cent of investments in the petroleum industry, so that the total import share (direct and indirect) is about 45 per cent.

Our input-output calculations show that in 2018 there were about 148 800 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 5.1 per cent of total employment in 2018. An increase in both investments and product efforts in the petroleum industry from 2018 to 2019 contributes to raising the number of employees associated with this industry to 158 400 people in 2019.

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.