Alaska's uncertain economy makes it to the New York Times (Anchorage: sales, 2015)

[RayinAK]

http://www.nytimes.com/2014/10/09/us...isis.html?_r=0

“There’s a lot of uncertainty out there,” said Jim Sampson, a former borough mayor and labor leader who is director of the training center. “You can feel it in the community and see it in the for-sale signs on the houses.”

Economic anxiety in Alaska is roiling an already sharp-edged political season here, focused on one of the most competitive Senate races in the country: an endangered Democratic incumbent, Mark Begich, against a hard-charging Republican challenger, Dan Sullivan, a former state attorney general and natural resources commissioner.

The worries start with energy extraction, for decades a pillar of the state’s economy that provides about a quarter of its gross state product. These days, Alaska is producing and shipping less natural gas because of market forces, and pumping less oil from the aging wells in Prudhoe Bay on the North Slope, reducing jobs and tax revenues.

[DagnyT63]

Thank you for sharing this. Do you think this is representative of how people feel, that there is a looming uncertainty? The way my husband talks about things up on the Slope, it seems the bosses go back and forth daily as to whether or not there is years worth of job security or months. Although it seems they are not talking about the oil boom ending as much as the specific company he works for is having some safety incidents and might be asked to leave.

I just worry about us relocating as far (and as difficult) as Alaska if the economy is uncertain or declining. We are fleeing The Great Recession as it is (our state is one of the few not seeing a "recovery") And I just don't want to move only to experience another one!

[thedwightguy]

If the internet has made anything clearer, it's that the decisions are not made where the resource is extracted.

[Glitch]

Originally Posted by RayinAK

http://www.nytimes.com/2014/10/09/us...isis.html?_r=0

Consider the source.

First, the oil royalties account for ~85% of Alaska's State budget, not 25%.

Second, Alaska has not been exporting natural gas.

The only thing they got right was that we are "pumping less oil from the aging wells in Prudhoe Bay on the North Slope, reducing jobs and tax revenues."

People have been predicting Alaska's demise since I arrived in Alaska 23 years ago. Even I am guilty of predicting Alaska's economic downfall if State spending continues unabated. However, it has not happened yet.

[Glitch]

Originally Posted by DagnyT63

Thank you for sharing this. Do you think this is representative of how people feel, that there is a looming uncertainty? The way my husband talks about things up on the Slope, it seems the bosses go back and forth daily as to whether or not there is years worth of job security or months. Although it seems they are not talking about the oil boom ending as much as the specific company he works for is having some safety incidents and might be asked to leave.

I just worry about us relocating as far (and as difficult) as Alaska if the economy is uncertain or declining. We are fleeing The Great Recession as it is (our state is one of the few not seeing a "recovery") And I just don't want to move only to experience another one!

You can take comfort in knowing that the recession that hit the lower-48 beginning in 2008 largely skipped Alaska. There were no significant increases in foreclosures, and unemployment is not any higher than it typically has been this last decade. Slope jobs are getting harder to come by, as less and less oil flows from Prudhoe Bay.

These are the unemployment rates of various locations around Alaska: labor force data

Although, I should point out that Alaska's economy and the lower-48's economy are not always similar. For example, when the lower-48 was suffering from the worse recession since the Great Depression from 1977 to 1984, Alaska's economy was booming due to Prudhoe Bay. But when the lower-48 started coming out of the recession in 1984 and began to boom, Alaska's economy took a dump causing people to abandon their homes because they could not afford the mortgages.

I have no idea what Alaska's future economy will be like, but the article was right in one respect - oil production is declining, and has been since 1989, which means that fewer oil royalties are going to fund the State. Since oil royalties make up ~85% of the State's budget, that is a concern.

[Dakster]

Glitch - What about the Military presence in Alaska. If the military were to significantly reduce their numbers in the state, wouldn't that also have a big impact on the economy in Alaska? FWIW, with the tensions in Russia and Asia the way they are, I don't really see that happening. SO more of philosophical question.

Also, it appears to me that there is a push to drill more wells in Alaska as well. So not as much oil flows, but certainly there is a chance that MORE oil will flow in the future or at least prevent the continual decline. I read somewhere that a certain amount of oil must flow thru the pipeline each day and that they are close to reaching that line.

I don't have any first hand experience in this, just what I read on ADN and the people I have talked to that work on the slope.

I don't see the house sales bargains that you all are talking about. Maybe I need to look in another place other than the MOA.

[Glitch]

Originally Posted by Dakster

Glitch - What about the Military presence in Alaska. If the military were to significantly reduce their numbers in the state, wouldn't that also have a big impact on the economy in Alaska? FWIW, with the tensions in Russia and Asia the way they are, I don't really see that happening. SO more of philosophical question.

Also, it appears to me that there is a push to drill more wells in Alaska as well. So not as much oil flows, but certainly there is a chance that MORE oil will flow in the future or at least prevent the continual decline. I read somewhere that a certain amount of oil must flow thru the pipeline each day and that they are close to reaching that line.

I don't have any first hand experience in this, just what I read on ADN and the people I have talked to that work on the slope.

I don't see the house sales bargains that you all are talking about. Maybe I need to look in another place other than the MOA.

The military has already reduced their numbers significantly in Alaska during the 1990s. Which is why Fort Richardson Army base and Elmondorf AFB are now combined into Joint Base Elmendorf-Richardson (JBER).

Alaska has been trying to get ANWR opened up for oil production since the 1990s. It was even included in the 2014 budget by the House, but the Senate rejected the House budget. If ANWR is ever opened for oil production, it could give new life to the Trans-Alaska Pipeline. Otherwise, once the oil drops below 325,000 ± 25,000 barrels per day, then flow problems prevent the pipeline from being operated safely. Currently, the north slope is producing ~548,000 barrels per day.

There is always a chance more oil could be produced. After all, just last year the federal courts vacated the ruling by the US Wildlife Service that set aside 187,000 sq. mi. (larger than the State of California) of the north slope as "critical habitat" for the polar bear. An area that includes the National Petroleum Reserve, to the west of Prudhoe Bay.

I did not say anything about home sale bargains. I said the foreclosures that were rampant throughout various States missed Alaska, as did the high unemployment rates. I do not think Anchorage ever got above 7.5% unemployment in the past decade. Interest rates are low, and home prices are only slightly higher than a decade ago. A new 4-bedroom home on a quarter acre lot in Anchorage will still run around $325,000, and around $100,000 less for the same home on an acre of land in the Valley.

[Dakster]

Thanks. And it wasn't you that mentioned the home sales bargains... But thanks for addressing that issue.

Seems like a lot of doom sayers are out there, but somehow it all works out and the state survives.

On a side note, oil is below $90 per barrel... Far lower than forecasted by the Alaskan legislature/budget analysts... Appears that it is also challenging the shale oil drillers too.

Shale Boom Tested as Sub-$90 Oil Threatens U.S. Drillers - Bloomberg

Glad to know that 525k barrels per day is still flowing through the pipeline...

[RayinAK]

Originally Posted by Glitch

Consider the source.

First, the oil royalties account for ~85% of Alaska's State budget, not 25%.

Second, Alaska has not been exporting natural gas.

The only thing they got right was that we are "pumping less oil from the aging wells in Prudhoe Bay on the North Slope, reducing jobs and tax revenues."

People have been predicting Alaska's demise since I arrived in Alaska 23 years ago. Even I am guilty of predicting Alaska's economic downfall if State spending continues unabated. However, it has not happened yet.

You are correct about Alaska not exporting natural gas.

In reality a lot of people are worrying about the AK's economy because of the dwindling oil production in recent years. But we already know that our economy is sort of boom and bust, and the last drop happened in the '80s. That's when I lot of people left Alaska. Back then I was in the military, so I was not affected by it much.

[Glitch]

Originally Posted by RayinAK

You are correct about Alaska not exporting natural gas.

In reality a lot of people are worrying about the AK's economy because of the dwindling oil production in recent years. But we already know that our economy is sort of boom and bust, and the last drop happened in the '80s. That's when I lot of people left Alaska. Back then I was in the military, so I was not affected by it much.

Oil production in Alaska has been declining longer than it was ever increasing. Alaska oil production began increasing in 1977 with the completion of the Trans-Alaska Pipeline and the oil terminal in Valdez. Oil production continued to increase for 12 years, until 1989. Since 1989 oil production has been declining. The oil in the pipeline is now less that half what it once was 25 years ago. If oil production continues to decline at its current rate, there may be about 15 years left in the life of the pipeline.

I recall them talking about implementing a State income tax back in the 1990s, when Knowles was Governor. Of course that was also when the State was spending in excess of $20,000 for every man, woman, and child in Alaska. Now, according to the enacted FY 2015 budget, the State is spending $14,477.94 for every man, woman, and child in Alaska.

While that is certainly an improvement, it is in no way sustainable by Alaskan citizens without those oil royalties.