New report compares Alaska’s recession to other energy-dependent states

When oil prices sank three years ago, Alaska’s economy went in the same direction, falling into recession. And, while recessions in other energy-dependent states have come and gone, Alaska’s economy has yet to recover.

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Economist Mouhcine Guettabi looked at why it’s taking longer here. He set out to compare Alaska’s recession to those of other energy-dependent states, and how oil prices influence these states. Guettabi works at the University of Alaska’s Institute of Social and Economic Research.

In a new report, he found that, out of 13 historically energy-dependent states, six experienced economy-wide job loss as a result of oil price declines, starting in 2014. Out of those, Guettabi says North Dakota and Alaska are the only two that continue to be in recession.

According to Guettabi, Alaska lost ground for 34 straight months — the longest recession in the state’s history. In that time, the state has lost between 12,000 and 13,000 jobs.

Guettabi says while Alaska is not the only state in the country that relies on oil revenue, in Alaska, that reliance is on another level.

“The ones that don’t have a lot of oil revenue dependence seem to recover a little bit faster because they only had that private channel dependence, and their budgets weren’t struggling as much as ours,” Guettabi said.

He says the state’s decision to use permanent fund earnings to help pay for state government should help the economy in the future.

According to Guettabi, states that recovered faster also had industries that were still growing while the economy as a whole was in recession.

“In Alaska, with the exception of healthcare and tourism, basically everything across the board was going down,” Guettabi said.

Guettabi says going forward, it will be important to support other sectors of the economy, to ensure they are less dependent on oil and gas.

He looked at states where the economy has recovered. There, he found when oil prices started rising again, the economy reacted and grew faster than it has in Alaska.

Larry Persily is a former federal pipeline coordinator in Alaska. He says the state will always be the last to come out of oil-driven recession.

“Alaska is more heavily dependent on oil and gas than any of the other producing states, be it Oklahoma, North Dakota, Texas, Louisiana, California, New Mexico, the list goes on and on,” Persily said.

Persily says the state could take more steps to reduce that reliance, but so far that hasn’t happened. He says the lessons to be learned here are painful.

“As exhibited by the fact that Alaska could have learned a lesson over the past decades, but has chosen not to,” Persily said.

While the price of oil is up right now, Persily says it’s inevitable it will dip again at some point. He points to taxes income and sales taxes in other states, that lesson dependence on oil prices.

“It wouldn’t hurt us to pay for the public services that we enjoy,” Persily said. “And not be so heavily reliant on the fluctuation in global oil markets and production.”

While Alaska’s economy is not out of recession yet, there are some positive signs leading economists to believe it may be nearing the end. Whether the state will have a different experience if oil prices dip again is another question.