The Norwegian Butter Crisis

by Elaine Schwartz    •    Mar 25, 2012    •    980 Views

Reserves were low, demand was high and prices skyrocketed. No, not oil.


Butter demand surged in Norway several months ago when a low carb high fat diet swept the nation. At the same time, the supply of butter plunged because wet weather diminished the quality of livestock feed. Worse feed meant less milk.

You see where this takes us. More demand, less supply, and not only will price rise, but for Norway, it also meant a devastating butter shortage.

Here, Stephen Colbert tells the whole story of Norway’s butter crisis and a Russian butter smuggler.

The Economic Lesson

Usually, Norway represents a happy economic story. Endowed with immense oil wealth, they used the proceeds wisely by establishing a Government Pension Fund to invest in the future. Recognizing the possibility that the value of their currency would soar because of oil demand, they discouraged people from buying relatively cheap imports by protecting domestic industries. One result was a dairy cooperative monopoly. So, when the butter crisis hit, there was no way to get extra butter until tariffs were lowered. Until then, supply contracted and demand soared.

As you can see, Norway’s butter crisis is a economic tale of oil wealth, monopoly, tariffs, supply and demand.

Here, Slate tells the whole economic story.

An Economic Question: How would a demand/supply graph represent the Norwegian butter price spike and quantity shortfall?

One Response to The Norwegian Butter Crisis

  1. Davey says:

    The nationwide reduction in supply would shift supply curve left along the demand curve. Creating a new equilibrium with less demand at a much higher price. If Norway had a comparative advantage in producing milk over butter then the industry would need to adjust to produce more butter, this itself would cause a shortage in milk, and would be the same as chasing ones behind. Tariffs on imported butter would need to be relaxed to address the shortage.

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