Norway Begins Formal Study on Transition Away from Fossil Fuels Amid Political Compromise

Economic

Summary:

To secure support for the 2026 national budget, Norway’s government has agreed with the Green Party to establish a commission tasked with exploring how to reduce the country’s deep reliance on oil and gas....

Government and Green Party Reach Breakthrough on Energy Transition

In a strategic political compromise that may reshape Norway’s long-term economic model, the Norwegian government has accepted a key demand from the Green Party (MDG) to form a commission to study how the nation can move away from fossil fuel dependency. This agreement was central to the Green Party’s support for the draft 2026 national budget.

Although the Labor-led coalition does not command a parliamentary majority, it has demonstrated flexibility by agreeing to this initiative, signaling that environmental priorities are becoming a decisive factor in budget negotiations. The move introduces the possibility of gradually decoupling Norway’s economy from the hydrocarbon industry that has fueled its wealth for decades.

Norway’s Oil Legacy Faces Structural Review

Norway remains Europe’s largest oil and gas producer outside of Russia, with its economic prosperity historically tied to hydrocarbon exports. However, as global climate policies tighten and domestic political demands shift, the country faces growing pressure to consider alternative economic pathways.

The newly approved commission is tasked with evaluating multiple scenarios to improve Norway’s economic adaptability. Its scope includes enhancing labor and resource efficiency in the context of declining production from the Norwegian continental shelf. This institutional effort marks a clear causal response to diminishing fossil fuel output and growing global climate commitments.

The Green Party had previously campaigned on phasing out oil and gas extraction by 2040, and while this specific deadline remains aspirational, the creation of this commission represents tangible momentum in that direction. It formalizes a government-backed inquiry into structural economic transformation.

Electric Vehicle Tax Incentive Phase-Out Delayed Until 2028

Another key point in the agreement was the delay in the removal of Norway’s VAT exemption for electric vehicles. The initial government proposal sought to reduce the price threshold for VAT-free status from 500,000 kroner to 300,000 kroner starting in 2026 and to eliminate the VAT exemption entirely by 2027.

Under the new compromise, the full phase-out will be postponed until 2028, pending approval from European authorities. The causal chain here involves tax policy directly impacting EV affordability, which in turn affects EV adoption rates. Norway already has the highest electric vehicle adoption rate globally, with EVs dominating new car registrations. Maintaining tax incentives, even temporarily, helps sustain this leadership and supports emissions reduction targets.

Broader Implications: Climate Policy Gains Institutional Footing

These developments underscore a shift in how climate action is embedded within Norway’s governance structure. Rather than proposing abrupt policy changes, the government is now institutionalizing long-term strategic reviews to manage complex transitions. The agreement balances fiscal responsibility with climate ambition, recognizing that policy tools such as taxation, economic diversification, and labor market adjustments must work in coordination.

Moreover, the commission may influence broader European debates, as Norway’s oil wealth has long placed it at odds with the continent’s green transition narrative. By beginning a structured conversation about post-oil prosperity, Norway positions itself to lead rather than resist the clean energy future.

Norway’s decision to formally investigate pathways out of fossil fuel dependency reflects a maturing of environmental governance. While no concrete timeline for phasing out oil production has been set, the political and institutional architecture for transition is now in motion. As the commission begins its work, and as EV incentives are gradually revised, the contours of a future Norwegian economy less tethered to oil and more aligned with sustainability are beginning to take shape.

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Economic

Commodity

Global Food Prices Drop to Lowest Level Since January 2025

The United Nations Food and Agriculture Organization (FAO) has announced that its Food Price Index fell to an average of 125.1 points in November 2025, marking the third consecutive monthly decline. This figure represents a drop from the adjusted 126.6 points in October and is the lowest recorded since January 2025. Compared to the same period in 2024, the index is down 2.1%, and it has plummeted 21.9% from the record high set in March 2022.

This decline reflects both causal and correlated relationships: abundant global supply has directly pressured prices downward (causation), while weaker global demand and macroeconomic uncertainty have added to the trend (correlation).

Sugar and Dairy See Steepest Price Drops Amid Strong Supply

Sugar prices in November fell 5.9% month-on-month to their lowest since December 2020, with the FAO citing a robust global production outlook as the primary driver. The dairy price index dropped by 3.1%, continuing its fifth consecutive month of decline due to increased milk output and ample export availability. These reductions reflect direct causality, where increased supply leads to downward price pressure.

Vegetable oil prices decreased by 2.6%, hitting a five-month low. Declines in palm and other oils were strong enough to overshadow modest gains in soybean oil. This mixed performance across subcategories within the vegetable oil segment highlights internal market dynamics, where some product-specific factors offer resilience but fail to counteract the broader downtrend.

Meat Prices Dip Slightly Amid Complex Global Conditions

The meat price index slipped 0.8% in November, driven mainly by notable decreases in pork and poultry prices. However, beef prices remained generally stable, supported in part by the U.S. lifting certain import tariffs, which eased recent price pressures. In this case, policy adjustments correlate with price stability, although the causal chain between tariffs and market pricing in the beef sector remains influenced by global trade volumes and consumer demand patterns.

In contrast to most categories, cereal prices increased by 1.8% in November. Wheat prices surged due to speculation of higher purchases by China and escalating geopolitical tensions in the Black Sea region. Corn prices also rose, supported by rising export demand from Brazil and adverse weather conditions in South America disrupting crop yields.

These developments reflect direct causal relationships: geopolitical instability and increased procurement contribute to wheat price spikes, while weather disruptions and export demand drive corn prices upward.

Record Global Cereal Production and Stock Forecast for 2025-2026

Despite rising cereal prices, FAO’s separate supply-and-demand report upgraded global cereal production for 2025 to a record 3.003 billion tonnes, up from last month’s forecast of 2.990 billion tonnes. This revision was largely attributed to improved wheat output estimates.

In tandem, the FAO increased its projection for global cereal stockpiles at the end of the 2025–2026 marketing year to an unprecedented 925.5 million tonnes. Contributing factors include higher wheat reserves in China and India and stronger coarse grain stocks in exporting nations.

This expansion of supply represents a strong causal buffer against future price volatility. However, the ongoing demand from major importers and risks from climate or political shocks could still destabilize this outlook.

The FAO’s latest figures confirm a broad-based easing of global food prices, grounded in abundant supply and weak demand across key commodities. However, the rise in cereal prices underscores persistent geopolitical and climate-related risks that continue to influence the global food market. With record output and inventories providing a cushion, the outlook remains largely stable, though market watchers must stay alert to demand shifts and regional disruptions that could reverse the current trend.

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Political

Pentagon Greenlights Major Defense Export to Canada

On December 4, the U.S. Department of State approved a major foreign military sale to Canada valued at approximately $2.68 billion, as confirmed by the U.S. Defense Security Cooperation Agency (DSCA). The deal involves a wide range of air-to-ground offensive weapons and related equipment under the Foreign Military Sales (FMS) program, aimed at strengthening Canada’s airstrike capabilities and interoperability with U.S. and NATO forces.

This move signals not only the deepening of U.S.–Canada defense ties but also the U.S. administration’s continued commitment to support allied nations through comprehensive military modernization packages. The decision now awaits review by the U.S. Congress, a procedural step in all large-scale arms exports.

Scope and Strategic Implications of the Weapon Package

The package includes a formidable arsenal: up to 5,332 GBU-39 and GBU-53 Small Diameter Bombs (SDBs), 3,414 BLU-111 general-purpose bombs, 220 large BLU-117 bombs, and thousands of Joint Direct Attack Munition (JDAM) guidance kits, including the KMU-572, KMU-556, and KMU-557 variants.

These systems represent advanced precision-strike capabilities designed to enhance Canada’s deterrence posture and operational effectiveness in high-intensity conflict environments. The selection of SDBs and JDAM kits demonstrates a preference for versatile, GPS-guided munitions suitable for a range of mission profiles offensive and defensive alike.

The inclusion of training bombs, penetrator warheads, target seekers, fuses, software, spare parts, and full logistical and technical support services underscores the depth and sustainability of the agreement. These elements ensure that the acquisition goes beyond hardware to include operational readiness and lifecycle support.

Contractors and Offset Negotiations Still Pending

The principal contractors are Boeing Co. and RTX Corp., both headquartered in Arlington, Virginia. Their involvement reflects the central role of established U.S. defense giants in supplying precision munitions to allies. While offset arrangements are typical in defense contracts of this scale often involving local industrial participation or technology transfer the U.S. government has confirmed that no formal offset proposal has yet been submitted. Any such negotiations will be conducted directly between Canadian authorities and the contractors involved.

This absence of a finalized offset plan means the full economic implications for Canada’s domestic defense industry are still evolving. If offsets are negotiated, they may bolster Canada’s defense manufacturing base or contribute to knowledge-sharing in key defense technologies.

Economic and Political Context of the Deal

The approval of this sale occurs amid growing geopolitical tensions and renewed emphasis on strengthening NATO's defense capabilities. For Canada, the deal supports its ambitions to modernize its Air Force and align more closely with U.S. and NATO operational standards. The sheer volume and diversity of the munitions point to a long-term strategy to build up stockpiles and maintain readiness across a broad spectrum of scenarios.

From the U.S. perspective, the deal also benefits its domestic defense sector, supporting employment and sustaining production lines for precision-guided munitions. Economically, this reinforces the reciprocal value of FMS agreements for both exporter and recipient countries.

This $2.68 billion arms package reinforces the strategic and operational bond between the U.S. and Canada at a time of rising global security challenges. While still subject to Congressional review, the sale reflects Canada’s growing defense priorities and the U.S.’s strategic alignment with its northern ally. The depth of the package, including advanced munitions and comprehensive support, suggests not only short-term defense enhancements but also long-term integration and readiness within allied defense frameworks.

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Political

Economic

President Donald Trump praised cooperation between the US, Canada and Mexico at Friday’s World Cup draw, even as divisions over North American trade and immigration policy threaten to overshadow next year’s global soccer tournament hosted by the three neighboring countries.

“We’ve worked closely with those two countries, and the coordination and friendship and relationship has been outstanding,” Trump told attendees. “I think you’re going to have an event the likes of which maybe the world has never seen.”

Mexican President Claudia Sheinbaum and Canadian Prime Minister Mark Carney also attended the draw on Friday at the John F. Kennedy Center for the Performing Arts in Washington, and the trio appeared on stage to kick off the ceremony. They met privately with Trump for 45 minutes after the event, and the US leader told reporters beforehand he planned to raise trade and immigration in the talks.

Trump was largely laudatory of his fellow leaders, despite in recent weeks criticizing Canada over its opposition to his tariff regime and Mexico over immigration and counternarcotics policies.

“We’ve had a tremendous relationship,” Trump said.

After the meeting, Carney’s office said the three leaders “agreed to keep working together” on the US-Canada Mexico Agreement, the trade deal that Trump signed in his first term and is up for review next year.

The glitzy showcase assigned matchups of participating nations to be played in host cities in all three countries.

The US will face off against Paraguay and Australia in the group stage, Canada’s group includes Qatar and Switzerland, while Mexico is pitted against South Africa and South Korea. Each host team’s initial group will also include the winner of a European play-in game.

While teams will learn what opponents they’ll face in the first round on Friday, FIFA will announce on Saturday where the games will take place. The event doubled as another chance for Trump to put his mark on the tournament, as international governing body FIFA has gone to lengths to curry favor with the president.

Trump was given a speaking slot in order to receive a newly created FIFA peace prize, awarded to the president after he lost out on his coveted Nobel Peace Prize. Trump called it “truly one of the great honors of my life.”

Even some of the musical acts selected to perform at the draw — Andrea Bocelli and the Village People — are Trump favorites.

The World Cup promises to draw vast numbers of spectators and international fans to North America, and organizers have said they expect windfalls for the 16 host cities, 11 of which are in the US.

“Nobody’s ever sold as many tickets, and you’re still a long way from that ball being kicked down the field,” Trump said.

Yet organizers’ plans to roll out the welcome mat for fans around the world have run headlong into the Trump administration’s immigration crackdown, which has featured high-profile raids conducted by masked agents, restrictions on travel to the US and heated rhetoric against migrants.

Trump’s team has expressed confidence that steps including an expedited visa process for fans will ease concerns about coming to the US. But critics have said that the administration’s actions and message on immigration have already shattered the spirit of global unity the World Cup is supposed to embody.

The US in June restricted entry for travelers from 19 countries, and this week moved to further tighten immigration curbs after the shooting of two National Guard members by an Afghan national. Trump has also threatened to move World Cup games out of the Boston area if he thought the Democrat-run city was unsafe, though told reporters on Friday he did not want to do so and believed he could address any issues. The games are being held in the suburb of Foxborough.

While the event will require close coordination among the three host countries, Trump is battling with Canada and Mexico over trade, immigration and national security. The president has openly mused about launching strikes on drug cartels in Mexico and turning Canada into the 51st US state. Most recently, he’s threatened to pull out of the North American trade pact he negotiated during his first term.

Trump’s Presence

The president has been heavily involved in planning and promotion for the upcoming tournament, frequently hosting FIFA President Gianni Infantino at the White House. The organization opened an office in Trump Tower in June.

Trump stood up a World Cup task force to handle the logistical and security challenges surrounding the premier showcase for international soccer, and made himself the chair. Andrew Giuliani, son of Trump ally Rudy Giuliani, serves as the panel’s executive director.

Forty-two of the 48 qualifying countries have been finalized for the World Cup, and playoffs in March will determine the final six berths. During the draw, FIFA divided the 42 teams and six placeholders into 12 pots of four teams each.

The US, as a host nation, is gaining a significant advantage as the first seed in its pot, as are the other two hosts, Canada and Mexico. The other nine top seeds are the highest-ranked nations in the world: Spain, Argentina, France, England, Brazil, Portugal, Belgium, Germany and the Netherlands.

The US men’s national team, ranked 14th in the world, has never won a World Cup. Its best-ever finish was a third-place result at the first tournament in 1930. The US women’s national team, by contrast, is the most successful in history with four World Cup wins.

Sports Platform

The draw at the Kennedy Center came months after Trump ousted the cultural hub’s bipartisan leadership over criticism of what he called “woke” programming and installed allies in their place — as well as himself as board chair.

The event was co-hosted by comedian Kevin Hart, supermodel and television personality Heidi Klum and actor and producer Danny Ramirez. It featured live performances by musicians including Robbie Williams and Nicole Scherzinger, as well as the other acts.

The president has frequently used sports as a platform to promote his own profile and policies.

He attended the 2025 Club World Cup final and stood on stage for the trophy ceremony with the winners. Trump invited Portuguese star Cristiano Ronaldo to a gala dinner with Saudi Crown Prince Mohammed bin Salman, and hosted Italian powerhouse club Juventus at the White House earlier this year.

Trump has also appeared at the Super Bowl, Ryder Cup, Daytona 500, US Open Tennis Championships, as well as multiple UFC fights, a New York Yankees game and the NCAA wrestling championships.

Source: Bloomberg

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Commodity

Silver touched a fresh record high and capped its second weekly gain as strong inflows to exchange-traded funds added more impetus to a scorching rally.

The white metal rose as much as 3.9% on Friday to an all-time high of $59.33 an ounce. Total additions to silver-backed ETFs in the four days through Thursday are already the highest for any full week since July, a strong indicator of investor appetite despite signs silver’s gains may be overdone. Silver Hits Fresh Record as Strong ETF Inflows Sustain Rally_1

Silver Hits Fresh Record as Strong ETF Inflows Sustain Rally_1

“These flows can quickly amplify price moves and trigger short-term short squeezes,” said Dilin Wu, research strategist at Pepperstone Group Ltd. For much of this week, the metal’s 14-day relative strength index has whipsawed either side of 70 — a threshold above which traders are likely to deem the metal as overbought.

Silver prices have roughly doubled this year, outpacing a 60% rise in gold. The rally accelerated in the last two months, in part thanks to a historic squeeze in London. While that crunch has eased in recent weeks as more metal was shipped to the world’s biggest silver trading hub, other markets are now seeing supply constraints. Chinese inventories are near their lowest in a decade.

“Silver’s outsized rally signals it’s no longer gold’s quiet sidecar,” said Hebe Chen, an analyst at Vantage Markets in Melbourne. “The market is waking up to structural scarcity and fast-rising industrial demand, not just the haven story.”

The metal’s recent surge has also been supported by rising expectations the Federal Reserve will lower interest rates at its meeting next week. Swap contracts indicate a near-certainty the Fed will reduce the cost of borrowing — typically a positive for non-yielding precious metals. These bets withstood the latest US data, which showed the Fed’s preferred inflation gauge in September rose in line with economists’ expectations.

Silver could rise to $62 an ounce in the coming three months “on the back of Fed cuts, robust investment demand, and physical deficit,” Citigroup Inc. analysts including Max Layton wrote in a note.

Not just valued as an investment asset, silver also has many useful real-world properties that make it a component in a range of products, such as circuit boards, solar panels and coatings for medical devices. Global demand for the metal has outpaced output from mines for five consecutive years.

Silver rose to $ an ounce as of in New York. It’s up more than 3.3% for the week, following last week’s 13% surge. Gold slipped to $ an ounce, while platinum and palladium also rose. The Bloomberg Dollar Spot Index inched lower.

Source: Bloomberg

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Commodity

Oil gained, finishing the week positive as investors assessed the murky outlook for a cease-fire in Ukraine and as the commodity pushed past an important technical level.

West Texas Intermediate rose 0.7% to settle above $60 a barrel, signaling that a risk premium persists as a peace deal between Russia and Ukraine remains elusive. Ukrainian negotiators continued talks with US officials in Florida for a second day, with Russia objecting to some of the points in a US-backed plan.

The market is watching for progress on a settlement that could lower prices by potentially easing sanctions and boosting Russian oil flows just as an expected oversupply in the market starts to materialize.

But an agreement appears distant: Ukraine took credit for an overnight attack on Russia’s Syzran refinery and the Temryuk seaport. Meanwhile, Washington reportedly lobbied European countries in an effort to block a plan to use Moscow’s frozen assets to back a massive loan for Ukraine.

Adding to bullish momentum, WTI on Friday settled above its 50-day moving average, a key level of support for the commodity. Prices have also received a boost from algorithmic traders covering some of their bearish positions in recent sessions — and analysts say more buying could materialize in coming weeks.

“This session should mark the first notable short covering program since algo selling activity exhausted itself, and the bar is low for subsequent CTA buying activity to hit the tapes over the coming week,” said Dan Ghali, a commodity strategist at TD Securities. Oil Rises as Traders Focus on Murky Russia-Ukraine Peace Talks_1

Oil Rises as Traders Focus on Murky Russia-Ukraine Peace Talks_1

Countering geopolitical risks, oversupply is putting downward pressure on prices globally. Saudi Aramco will reduce the price of its flagship Arab Light crude grade to the lowest level since 2021 for January, while Canadian oil has tumbled. And the number of crude oil rigs in the US rose by 6 over the past week, according to Baker Hughes.

Source: Bloomberg

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Bond

Central Bank

Treasuries are on track for their worst week in six months as conflicting economic data have challenged expectations for how much the Federal Reserve might cut interest rates next year.

Yields were higher by four basis points early afternoon in New York, with the 30-year bond’s reaching 4.80%, last seen in late September. While a much bigger selloff in Canadian government bonds Friday, sparked by stronger-than-expected employment data, was a factor, US yields had already risen to weekly highs. US Bonds Head for Worst Week in Six Months Amid Doubts on Fed_1

US Bonds Head for Worst Week in Six Months Amid Doubts on Fed_1

The US 10-year yield at 4.14% is more than 10 basis points higher since Nov. 28, the most in a week since June. Fed policymakers remain widely expected to cut interest rates at their meeting next week, however expectations for additional cuts next year have been pared amid mixed signals on the health of the US labor market.

“Expectations have been adjusted in a more hawkish direction for the Fed,” said Steven Zeng, an interest-rate strategist at Deutsche Bank. “Investors are growing skeptical of more rate cuts next year.”

Meanwhile, Friday’s delayed release of September personal income and spending data, which includes the inflation gauge the Fed aims to keep around 2%, showed that it accelerated to 2.8%, as economists estimated. Several Fed policymakers have said the inflation trend should forestall rate cuts.

Thirty-year Treasury yields are more than 12 basis points higher, the most in a week since early April, when havoc erupted in financial markets globally after the US administration rolled out its tariffs agenda.

US administration comments this week about the potential for changes in Fed leadership — beyond its plans for a successor to Chair Jerome Powell, whose term ends in May — “have reinvigorated uncertainty, which is reflected in the price action,” said Dhiraj Narula, an interest-rate strategist at HSBC Securities. Treasury Secretary Scott Bessent this week said long-term residency in the district should be an eligibility requirement for regional bank presidents.

The market for long-maturity interest rates in particular “doesn’t like uncertainty around what the potential path for policy might be,” Narula said. “When policy uncertainty goes up, investors need larger premiums to sit in longer tenors.”

Also hampering the Treasury market into next week, auctions of three-, 10- and 30-year debt are slated to begin Monday, a day earlier than usual to avoid coinciding with the Dec. 10 Fed announcement. Besides the rate decision, those will include policymakers’ quarterly summary of economic projections. Fed governors and regional bank presidents anonymously indicate their expectations for key indicators and interest rates over the next several years.

“Markets are probably looking ahead to the bond auctions and waiting for the December FOMC to hint at future direction,” said Evelyne Gomez-Liechti, a strategist at Mizuho International Plc.

Furthermore, next week is anticipated to bring most of the last of this year’s investment-grade corporate bond supply, concentrated on Monday and Tuesday ahead of the Fed.

The bulk of this week’s move in yields came on Monday, fueled by a deluge of corporate debt sales and a warning of potential rate hikes from Bank of Japan Governor Kazuo Ueda. Any signal that the BOJ might tighten policy can ripple across global bond markets, pushing yields higher elsewhere.