Opinion: Oil Exploration Will Make Iceland Poorer And Less Free

Iceland’s Norwegian dreams are 50 years too late

A recent Gallup poll revealed what we’ve long suspected: about half of Icelanders wish they were Norwegian. Specifically, nearly half the population supports resuming oil exploration in Icelandic waters. They’re dreaming of sovereign wealth funds and that sweet, sweet Norwegian safety net. What the survey didn’t ask was why people want oil exploration. Icelanders may just simply want to be rich. No shame in that! Fjandinn hafi það, Iceland should be stinking rich!

But that’s exactly why we shouldn’t restart oil exploration.

The problem with chasing your neighbour’s success story is that by the time you catch up, the game has usually changed. The world already sits on enough proven oil reserves to destroy the climate multiple times over. And not a little bit more, but roughly five times more than we can burn and maintain a livable world. These are what economists call “stranded assets,” investments that become worthless when the world changes. Even if you forget the environmental nihilism of it all, betting on oil exploration in 2025 is like investing in typewriter companies in 1995.

There’s an Icelandic word for this: tímaskekkja, literally “time distortion.” Oil exploration in 2025 is the perfect tímaskekkja. It’s a policy proposal that might have made sense decades ago but is embarrassingly out of step with today’s reality.

Consider the timeline. In the most optimistic scenario, exploration takes three to five years, development another seven to ten years. First oil wouldn’t flow until the mid-2030s at the earliest, though realistically closer to 2050, when the UN says we must reach net-zero emissions. By then, we’d be selling into a market the entire world is working to abandon.
“There’s an Icelandic word for this: tímaskekkja, literally ‘time distortion.'”

If Icelanders really want Norwegian-level prosperity, we should look at what Norway is doing next, not what made them rich 50 years ago. Norway’s sovereign wealth fund no longer invests in oil. Rather, it now invests heavily in renewable energy. They’re preparing for the post-oil world. Even Saudi Arabia has invested $400 billion in alternative energy since 2016.

If Saudi Arabia is hedging its bets, what excuse does Iceland have?

Chasing potential oil when we’re already sitting on a historic green opportunity is foolish. It would be shocking for Iceland to waste its competitive advantage in the climate transition for a pipe dream. We have some of the world’s cheapest, cleanest energy. Iceland’s renewable energy potential per capita far exceeds what most countries could dream of extracting from oil. Our geothermal capacity alone could power green innovations worth billions annually.

Iceland could just as easily set up a sovereign wealth fund from green earnings as from oil revenues, except green earnings are actually sustainable (in the economic sense). We could structure energy projects as public-private partnerships where communities retain ownership stakes, following Norway’s model but powered by clean energy instead of fossil fuels.

While we consider taking the first steps towards oil exploration, green energy investments are actually creating real wealth right now. The world’s richest man, Elon Musk, got there by disrupting the oil industry. Do we really want to warm ourselves with the dying embers of yesterday’s industry?

And let’s not forget the political theatre in Alþingi this summer. If you think fishing rights created divisive politics, wait until we’re handing out drilling licences. The politics of oil would make fish quotas look like a cake walk. Iceland’s small political system has already proven vulnerable to capture by special interests. Now we’re considering inviting in global oil companies?! Some of the world’s most politically sophisticated corporations?!

This isn’t just about economics. It’s about independence. Oil companies don’t partner with small nations. They dominate them. We’d be trading our independence for the promise of quick wealth that may never even materialise.

The choice facing Iceland isn’t between getting crazy rich and environmental protection. That’s a false dichotomy. Rather, it’s between betting on a dying destructive industry or investing in the future where Iceland can truly be a leader. That Gallup poll would have been much more constructive if it were about whether we should build a sovereign wealth fund entirely from renewable energy.

If we really want to be like Norway, we should act like Norwegians. Let’s be smart enough to see when the party’s over and wise enough to invest in the next big opportunity. Let’s not trade our hard-won independence to be an oil company vassal state, all for an oil mirage in warming oceans.

Adam Roy Gordon is a Reykjavík-based sustainability strategist with international experience at the United Nations, leading global corporate sustainability initiatives, and academia, including as a lecturer at Columbia University’s Climate School.