The priviliged political class using the financial windfall of a huge natural resource to benefit their wealthy chums instead of benefiting everyone in society? You're right, that's not surprising at all, unfortunately.

Sadly I have friends that rallied against big oil, voted dem here in the states, but then tell me about how great fracking and offshore oil is now that their business stands to make $$ from it. Proves to me people are ruled by their wallets and personal bank accounts.

Could someone explain to me why Norway's oft celebrated oil money fund, which takes a load of revenue and invests it in foreign stocks and property, is a superior idea to investing in your own nation's infrastructure and education systems?

Because it generates returns that can, in turn, be invested in those things.

So if you have enough cash to build a road that will greatly aid the economy and wellbeing of society you have the option to:

a) build the road and reap the benefits
b) invest in a foreign nation's road building program and diligently harvest the interest so that in ten year's time you can build the road

How is b better?

Because Octavious, not only will those returns be able to build a road in ten year's time, but it can build another one in 20 years, and another in 30 years, and another in 40.

So, would you rather spend all your money when you get it (read: Dubai) and have nothing leftover for when the oil runs out or would you rather invest it so you can spread out your returns over several generations so that even when the oil runs out your people can have a higher standard of living.

I still haven't forgiven Thatcher for flogging of our national assets and then using it in a bizarre social experiment of mass unemployment to break the will and will of the unions and the UK labour force.
The unions and labour force are still alive and kicking, Thatcher has gone ...... sadly so has all of the money raised in the privatisation sell-offs, short-term political policies leading to long-term societal problems, well done Margaret !!

Isn't that the dead woman? :P

But yeah, it's stupid...

Another question though: what makes it justified for us to take all the oil that was made in billions of years (not sure, but a LONG time) in a few decades and use it all?

Am I the only one who thinks that in itself is wrong? I know that's how we do things in the west, but still...

Steephie, if (and this could be seen as a big if) we use this energy win-fall to build huge numbers of energy intense solar harvesting devices (wind turbines, photo-voltaics, solar-thermal, hydro-electric, csp, and maybe some bio-mass processing) then we can kick-start an energy revolution, massively decreasing the cost of energy.

Which could in turn end poverty - where poverty is something akin to services available, you can use power to build homes, make food, run factories (which produce goods), operate electrical goods... - of course politics may make things complicated (by which i mean, in principle, people with power don't like to give it up)

Fair enough, if you help the world, sure... But if you just take the oil, build a lot of things running on oil and take more oil to fuel the things running on oil, raising the price, selling the stuff and make loads of money...

Well, then you waste the oil I'd say.

And it's safe to say that the west is capitalist enough to rather leave the oil there than go through the effort of ending poverty or something with it...

But still, good point orathaic.

@goldfinger

If the road didn't achieve anything you'd be right, but if that was the case it's pointless building it in the first place.

Public infrastructure is only ever built if economic studies say it will give a good return on the investment. In the UK we try and aim for a 1:8 ratio, give or take. Build the road now and the economy benefits, tax revenues go up, and you can build another with those extra revenues in ten years.

@ Octavious:

The Tories didn't use the tax revenue from North Sea oil to fund infrastructure projects. They used it to fund tax cuts for the most wealthy in society.

Much of the funding for road building actually came from money cut from the rail budget. That's just substituting one type of infrastructure for another, rather than actually contributing to an overall structural increase in the funding for transport infrastructure.

@ Jamie

By tax cuts do you mean setting the top rate of tax to the same level considered by Labour to be the most prudent for the vast majority of the time Blair and Brown were in power? The level that Labour evidently believed to be the best at generating revenue?

But that is another issue. You have not answered my question.

@steephie, i believe some capitalists will argue that the wealth they earn benefits the world - assuming someone accumulates lots of wealth from selling oil, they can then spend their wealth on something nice, creating demand for nice things, eventually economies spring up to cater for the demand, and eventually products become cheap enough for everyday users (look at mobile phones, in 20 years a minor product for the rich, or status symbol for business men, became a norm for every kid no matter how poor - and in Africa people are using mobile phones to circumvent banks, sending money to their families via their mobile phone accounts - that is new services for the 'poor' as a consequence of pure capitalism. With mostly greed at the heart of it... (seems a bit off-topic, and i know there are those who disagree, but in theory, it is also possible bad stuff happens at the same time. As the french say c'est la vie, or as the irish say shit happens)

@tax cuts - maybe they generated more wealth in the long run, it is gery hard to measure. The easiest thing to actually look at is tye current wealth distribution. Is it better or worse? How does getting old and dying vary by wealth?

@ Octavious: "By tax cuts do you mean setting the top rate of tax to the same level considered by Labour to be the most prudent for the vast majority of the time Blair and Brown were in power?"

Yes. The Tories CUT taxes to that level, and they funded that TAX CUT from North Sea oil revenue. I'm not a supporter of Blair or Brown either - their governments were far too soft on the rich.

"You have not answered my question"

Which question? The question that Goldfinger has already given a very good answer to? Ok, I refer you to Goldfinger's answer. It is the answer I would have given.

An answer that assumes building the road has no benefit?

Don't be dense, Jamie. You work in government. You know that any capital spend of any significance has to go through cost\benefit analysis. You invest a million on a road and you have to be damned sure of a multimillion pound benefit.

You build a road today in your country and the nation should expect a good return on the investment. The Left is constantly insisting we borrow more to spend on infrastructure projects for this very reason. So, again with the choice...

a) Invest in a road in your nation and get an impressive return and the road exists

b) Invest in foreign lands, get an ok return, and you might be able to build a road in the distant future.

In norway's case, there is reason to believe that they had far more money that was worth investing, after spending all the could reasonably be expected to (without behaving like certain middle eastern kingdoms) they invested the rest outside of the country.

There is negligible benefit to building 100 roads where you only need 3, it's a simple case of diminishing returns.

Octavious - I think you make a fair point with your observation. At least, it is a fair point when the country in question is not a developed country and improving the infrastructure would have many benefits. But the UK and Norway are fairly developed already. So, to prove my point let's walk away from the infrastructure example and let's say that they want to give the money back to the people (in the form of tax breaks! lol. No, actually, let's say cash payments)

You could use the profits from oil each year, divide them up and send a check to everyone. This is what Alaska does with it's residents. That will go on until the oil runs out. Let's say the oil lasts 50 more years ~2065 (good lord that's not too far away). So residents have the option to either take 100% of the payments now (let's assume they're the same every year) which will cover most people over 40 until their death. Or, they could accept 50% of the payments for the next 50 years, but promise their children and grandchildren and granchildren's grandchildren that 50% payment, which would proceed in perpetuity.

@ goldfinger

I can think of well over £100 billion worth of desired future infrastructure spending in the UK without trying. There is plenty of space in the UK for such development.

Now, it could be that Orathaic is quite right about Norway, and they just had so many oil dollars per head of population that they ran out of worthwhile projects. The UK had far fewer oil dollars per person and did not.

Which wraps up the debate rather nicely. Norway have their fund because they didn't have enough opportunities to invest in Norway. The UK doesn't because there were plenty of places to invest. The Guardian is talking tosh once again :).

I believe what you are saying from your Alaskan example is along the lines of "don't give the money to the people. They will only waste it on stupid things because they're stupid. The government should keep it and invest it for them"

No, I'm not saying that. I'm saying "why only give this generation the benefits of the natural resources of their land when you have the ability to create a more secure future for many more"

I believe, having just heard about the Alaskan example, that in a smaller country you would cause inflation, along with massive imports, which would push the cost of living up and generally hurt productivity per dollar - but Alaska as a part of the US does not need to worry about causing inflation of the US dollar... i think. Not sure about this one.

Yeah, you're not too far off the mark there as well orathaic.

Or you could cause a huge asset bubble that when it pops means that you have to have your uncle in Abu Dhabi bail you out.

@ goldfinger

Why do you think you are better placed to secure the future of the next generation than that generation's own parents? You are assuming that the people you give the money to would sell their own offspring down the river, which is frankly a crazy assumption.

It's what the social security system has done. Annnd the national debt. And pretty much anything else that the older generation has control of. Game theory shows that the older generation will always be greedy

@ Octavious: Why do you continue to claim that the UK's oil tax income was spent on road building? It wasn't. I've already told you that the primary source of the road building budget was drawn from cuts in other places, primarily rail. Why do you lie?

Your choices "a" and "b" in your last question to me implies that oil-funded taxes are the only source of income. You know that's not the case.