Read news from:
Austria
SHARE
COPY LINK
For members

MONEY

How will the war in Ukraine impact the cost of living in Norway?

Economic sanctions imposed on Russia in response to the invasion of Ukraine are already making their impact felt at petrol pumps, but what other knock-ons are there for the cost of living in Norway?

Published: 10 March 2022 13:48 CET
Shoppers in Tromsø
The war in Ukraine is going to have an impact on the cost of living in Norway. Pictured is shoppers in Tromsø. Photo by Chris on Unsplash

This week has already seen record-high prices for energy, petrol and diesel in Norway as a result of rising gas and oil prices triggered by Russia’s invasion of Ukraine.

The knock-on effects of the war are likely to be felt by Norwegian consumers even more in the near future, with the invasion impacting everything from the cost of fuel and energy to food and flight tickets.

Energy prices

Earlier this week, electricity prices topped 10 kroner per kilowatt-hour for customers in parts of Norway, when taxes and grid rent are included. Unfortunately for billpayers, this price is likely to rise in the future due to a mix of domestic factors and steps taken by Europe and the United States to ban oil or gas imports.

Even though the country relies primarily on hydroelectric power for its energy needs, sanctions against Russian oil and gas imports will still affect energy prices. The cost of electricity typically follows international oil and gas prices, which are at their highest level since the Global Financial Crisis in 2008.

Some consolation to households will be the government saying that it would look to continue its energy bill subsidy scheme, which sees the state pick up 80 percent of the bill if prices remain high.

The new minister for oil and energy, Terje Lien Aasland, told NRK that “for as long as energy prices are high, then we will contribute” and that the scheme would continue.

Food 

In February, monthly food prices rose by 4.5 percent, the largest monthly jump since 1981, figures from Statistics Norway released on Thursday revealed.

The rises seen in February weren’t a result of the war in Ukraine. However, industry heads have said that the war in Ukraine was likely to inflate shopping bills in the future.

“This is the first signal that there will be more (food price increases) here in the future with the war in Ukraine and the effect it gives. Inflation is high, and will be higher (as a result),” chief economist at food producer Nordea, Kjetil Olsen, told public broadcaster NRK.

The war in Ukraine affects food prices in two ways. Firstly, soaring fuel and energy costs increase overheads for producers, which are then passed onto suppliers, then to supermarkets and finally to consumers.

READ MORE: Why is food in Norway so expensive?

Secondly, Russia and Ukraine account for a third of the world’s barley and wheat exports, meaning the price of raw materials will also go up.

The impact of these factors won’t be felt straight away, though. This is because supermarkets typically only adjust their prices twice a year, once in February and once again in July. 

Fuel

Soaring crude oil prices have had a knock-on for fuel. Prices have already topped 25 kroner per litre for both petrol and diesel, and analysts have said that the squeeze at the pumps could become even tighter in the near future.

Professor Øystein Foros at the Norwegian School of Management, who has studied fuel prices for 20 years, told broadcaster TV2 that “The price of oil determines the price of petrol. If the oil price goes up more now, then we can get petrol prices of 30 kroner a litre”.

Fuel prices won’t just affect those at the petrol pumps, but also those at check-in terminals. This is due to the rising cost of jet fuel likely leading to more expensive airline tickets.

This will make it more expensive for foreign residents to visit friends and family back home and vice versa.

Airlines tickets may go up because some of the most popular airlines operating in Norway, such as Flyr, Norwegian and SAS, don’t have a fixed price agreement on fuel, meaning they are paying current market prices, which have soared recently.

Wages could go up

One unexpected effect of the war in Ukraine and one which could help offset some of the cost of living increases is the potential for wages to be increased. 

The country has just entered its wage settlement negotiation season. This is where unions and employers enter talks over how much wages for workers will increase for the year.

Increased inflation means unions are likely to push for higher wages to ensure that workers purchasing power doesn’t shrink.

“I envisage a possible wage increase of around three to four percent,” Kyrre Knudsen, chief economist at Sparebank 1, told NRK.

“The high prices of electricity, fuel and eventually food will pull up inflation. Now it is assumed that inflation will be around three percent, and then you will get a wage increase that exceeds inflation,” he explained.

“When you gradually sum up 2022, the salary for most people will have increased slightly more than the expenses, despite the fact that it looks quite dark right now,” Knudsen added.

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.
For members

MONEY

How Norway has become cheaper for tourists

The recent drop in Norway's price level has made it a more appealing destination for tourists looking to visit Scandinavia without breaking the bank.

Published: 21 June 2024 17:38 CEST
How Norway has become cheaper for tourists

Norway has long held a reputation for being one of the most expensive countries in Europe.

From sky-high prices for everyday items like groceries and dining out to costly accommodation and transportation, Norwegian prices often raise eyebrows among visitors and newcomers.

READ MORE: What will be cheaper and more expensive in Norway in 2024? 

The perception of Norway being unbelievably pricey is not unfounded; historically, its price levels have consistently ranked well above the European average.

Recent figures, however, indicate a potential shift in this dynamic.

The latest EU price statistics

In 2023, Norway’s price level was 25 percent higher than the average in EU countries, according to preliminary figures from the European purchasing power survey.

This marks a significant decrease from the previous year, when Norwegian prices were 43 percent above EU prices, as reported by Statistics Norway (SSB).

This decrease in price levels has implications for tourism.

As the cost differential shrinks, Norway becomes a more attractive destination for foreign visitors who may have previously been deterred by the high prices.

“The decrease in the price level in Norway compared to the rest of Europe has made it significantly more attractive for foreign tourists to holiday here with us.

“In return, it has become more expensive than before for Norwegians to holiday abroad,” Espen Kristiansen, a section manager at the SSB, said, according to the business newspaper e24.

Comparison with neighbouring countries

It must be noted that hotel and restaurant prices, which tend to be higher in Norway than in many European countries, still contribute to Norway’s overall high price level.

For these services, prices were still 43 percent higher than the EU average in 2023.

Comparatively, neighbouring Sweden’s prices were 14 percent higher than the EU average, down from 22 percent in 2022.

READ MORE: Five reasons why 2024 will be a good time to visit Norway

Denmark’s relative price level remained consistent, at 43 percent above the EU average, largely because the Danish krone is tied to the euro, unlike the Norwegian and Swedish currencies.

“Part of the explanation for the different developments in price levels in the Nordic countries is that the Danish krone follows the euro, unlike the Norwegian and Swedish ones,” Kristiansen said.

The most expensive country last year was Switzerland, with prices 74 percent above the EU average, according to the preliminary findings of the European purchasing power survey.

How a (relatively) weak krone also favours tourists visiting Norway

When travelling to Norway, tourists can still benefit from a favourable exchange rate (despite the currency’s recent uptick) even after taking inflation into account.

The weaker krone means visitors get more value for their money when exchanging foreign currency for Norwegian kroner.

READ MORE: How the weak Norwegian krone will affect travel to and from Norway

For instance, if a hotel room in Bergen costs 1,000 kroner per night, it would be around 88 euros at the current exchange rate. Three years ago, the same room would have cost approximately 100 euros.

Another example is dining out. A meal priced at 250 kroner (a main consisting of grilled salmon steak with vegetables, for example) is equivalent to 22 euros today, compared to 25 euros three years ago.

If you want a better understanding of how much cheaper a trip to Norway has become over time, you can use historical currency calculators to get a more exact estimate.

SHOW COMMENTS