Norway Bets Big on Fossil Fuels

Norway revised its 2026 oil and gas earnings forecast upward by $19 billion this week—from $60 billion to $79 billion—citing higher global energy prices, OilPrice.com reported. The windfall comes as Oslo doubles down on fossil fuel production at a moment when other producers are either stranded behind the Strait of Hormuz or scrambling to respond to the biggest supply shock since the 1970s.

The bet is straightforward: Europe needs gas, the Gulf can't deliver it, and Norway intends to fill the gap for as long as the crisis lasts. Whether that's months or years, Oslo is positioning itself as the continent's energy anchor. But the strategy carries risk. If the Iran war ends quickly, Norway could be left with expensive new infrastructure and a weakening case for long-term fossil fuel expansion.

Can Fields Closed in 1998 Really Save Europe?

In early May, Norway's Energy Ministry approved the reopening of three North Sea gas fields—Albuskjell, Vest Ekofisk, and Tommeliten Gamma—that were shut down in 1998, according to Enerdata. The fields will require approximately $2 billion in investment and won't produce a single cubic meter of gas until late 2028, with operations expected to run through 2048.

Recoverable reserves are estimated at 90 to 120 million barrels of oil equivalent, primarily gas and condensate. ConocoPhillips will operate the project, which involves 11 new wells tied back to existing Ekofisk infrastructure. The gas will flow to Emden, Germany; condensate heads to Teesside in the UK.

The volumes are modest—less than 1% of Norway's annual output, according to Energy News Beat. But timing matters more than scale. Norway already supplies roughly 30% of Europe's gas consumption, per Norwegian government data. With Russian pipeline gas down from 150 billion cubic meters in 2021 to 36 billion cubic meters in 2025, and Qatari LNG effectively cut off by the Hormuz closure, every additional cubic meter counts.

Equinor CEO Anders Opedal told Reuters in March that Norway has "no spare oil or gas capacity" left to bring online. The country has been running flat out since the Ukraine invasion. The reopened fields won't change that reality in the near term, but they signal something else: Norway is preparing for a world where European energy security depends on North Sea production well into the 2040s.

What About the U.S. Drilling Response?

Across the Atlantic, U.S. producers are finally starting to move. Diamondback Energy, the third-largest Permian Basin operator, announced in early May it would increase capital spending from $3.75 billion to $3.9 billion and add both drilling rigs and fracking crews in West Texas, Fortune reported. The company expects to produce at least 972,000 barrels of oil equivalent per day this year, up from a previous midpoint of 944,000 barrels.

Halliburton CEO Jeff Miller described the U.S. oil sector as being in the "early innings" of a rebound, explaining that smaller producers are already contracting more fracking fleets and extending drilling rig commitments. "The early movers are the smaller companies, but that's an important move because that early move by small operators is what takes capacity out of the market and creates tightness," Miller said in April, according to Fortune.

Still, the U.S. response has been cautious. The Financial Times noted that drilling expansion follows a 40% jump in oil prices from the global supply crunch, yet the overall rig count has remained relatively flat since the war began. Large publicly traded companies have maintained their previously set capital spending plans, wary of making long-term commitments based on what could be a short-term price spike.

The hesitation is understandable. U.S. shale wells don't work like Saudi taps—they require months of drilling, fracking, and completion before producing oil. Resources for the Future noted that meaningful supply responses can take six months to two years, "far too slow to play the role of 'swing producer.'"

Is the Petrodollar System Breaking?

While Norway and the U.S. ramp up production, a quieter crisis is unfolding in the financial architecture that has underpinned global energy markets for half a century. Bloomberg reported this week that the Iran war is disrupting not just energy flows but also the supply of petrodollars—the mechanism by which Gulf oil revenues are recycled into U.S. Treasury bonds and other dollar-denominated assets.

Gulf Cooperation Council sovereign wealth funds collectively hold roughly $2 trillion in U.S. assets, according to The Conversation. In March, one Gulf official told reporters that three of the four largest GCC economies were reviewing their sovereign wealth fund positions to offset the impact of the war. The U.S. Treasury lists Saudi Arabia and UAE funds among the top 20 national holders of Treasury securities, with almost $250 billion between them, The Globe and Mail reported.

The petrodollar arrangement traces back to a 1974 deal between the U.S. and Saudi Arabia: oil would be priced in dollars, Gulf states would invest their surpluses in U.S. assets, and Washington would provide security guarantees. The Iran war has exposed the fragility of that bargain. "If this war has shown anything so far, it is that allying yourself with the U.S. no longer guarantees security," former Goldman Sachs economist Jim O'Neill wrote, according to The Globe and Mail.

CSIS argued that Iran is fighting a different war than the U.S.—"one aimed at the global economy." Insurance premiums spike, shipping contracts unravel, and investor confidence evaporates. The longer the conflict lasts, the more permanent the economic damage becomes.

What About Consumers?

The pain is already visible at the pump. India raised fuel prices for the first time in four years on May 15, hiking diesel and gasoline by over 3%, Bloomberg reported. Prices rose again four days later. Diesel now costs 91.58 rupees per liter in New Delhi; gasoline is at 98.64 rupees—the highest since May 2022.

Prime Minister Narendra Modi urged Indians to adopt "voluntary austerity measures," calling fuel conservation an act of "patriotism," according to Al Jazeera. The appeal came after state elections concluded—opposition leaders noted that fuel prices were kept unchanged during the campaign.

India is the world's third-largest oil importer, with 90% of its oil coming from overseas and about half normally transiting the Strait of Hormuz. The country had been one of the last major economies to pass higher crude prices on to consumers. That dam has now broken.

Meanwhile, a different kind of consumer response is accelerating: home solar installations. OilPrice.com reported that soaring energy prices are driving a boom in residential solar, as households look to insulate themselves from volatile electricity costs. The dynamic mirrors what happened during the 2022 European energy crisis, when heat pump and solar panel sales surged across the continent.

What Changed This Week

An LNG tanker carrying a shipment for India exited the Strait of Hormuz on Friday—the first for the country from the Persian Gulf since the war began, Bloomberg reported. The Adnoc vessel went dark for weeks, turning off its transponder while loading cargo at Abu Dhabi's Das Island. It represents a trickle, not a flood: before the war, roughly three LNG tankers exited Hormuz daily. But it suggests Gulf exporters are finding ways to move fuel, even if volumes remain a fraction of pre-war levels. Norway's earnings revision and field reopening approvals signal that Oslo expects elevated prices and European demand to persist well beyond any near-term ceasefire. And India's second fuel price hike in less than a week shows that the political calculus around energy costs is shifting—governments can no longer absorb the losses.

What to Watch

Norway's 26th oil and gas licensing round is expected to move forward in the coming months, with 70 new blocks across the North Sea, Norwegian Sea, and Barents Sea. Companies have until September 1, 2026, to apply for exploration rights. The round has drawn criticism from environmental groups because some areas are closer to the coast than any previous licensing round. Watch whether U.S. producers follow Diamondback's lead and increase capital spending in the second half of 2026—Halliburton's Q2 earnings call in July will offer clues. And keep an eye on Gulf sovereign wealth fund positioning: any significant shift away from U.S. Treasuries would send ripples through global bond markets. For now, Norway is betting that Europe's energy crisis will outlast the war. The reopened gas fields won't flow until 2028, but the message is clear: Oslo isn't planning for a quick return to normal.