Ida Wolden Bache: Structural changes in energy markets and implications for inflation and monetary policy

Introductory remarks by Ms Ida Wolden Bache, Governor of Norges Bank (Central Bank of Norway), at the European Central Bank Forum on Central Banking 2023 "Macroeconomic stabilisation in a volatile inflation environment", Sintra, 27 June 2023. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
03 July 2023

Good afternoon and thank you for inviting me to take part in this distinguished panel.

In my remarks, I will offer some thoughts on how the structural changes in energy markets will affect energy prices, and more generally, inflation before turning to the implications for monetary policy.

But let me start with some observations about my home country.

Norway is an energy nation and a large oil exporter. Over the past decade, natural gas exports have increased in importance. Norway is highly integrated into the European energy market, primarily through trade in oil and gas, but increasingly also in the power markets. Since Russia's invasion of Ukraine, Norway has become Europe's largest single gas supplier. Norway is also an important supplier of flexible hydroelectric power. Close cooperation with Europe reflects our common interest in well-functioning energy markets during the transition to zero emissions

In the years to come, the petroleum sector's significance to the Norwegian economy will likely decline as petroleum resources on the continental shelf are depleted. Lower activity in the petroleum sector will have consequences for the Norwegian business structure. Substantial investments as well as reallocation of labour and other resources across firms and sectors may be required. Along this path, the green energy transition can be a catalyst. We are already seeing that technology developed in the petroleum sector serves as a springboard for jobs in the green sector.