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Providing coverage of Alaska and northern Canada's oil and gas industry
April 2017

Vol. 22, No. 16 Week of April 16, 2017

Fuel costs have small migration impact

ISER reports results of study into the extent that high energy costs in rural Alaska motivate village residents to relocate

Alan Bailey

Petroleum News

The University of Alaska Anchorage Institute of Social and Economic Research has published the results of a study into the extent to which high fuel costs in rural Alaska motivate rural residents to move to the state’s large regional hubs or to urban centers such as Anchorage and Fairbanks. The study found that, although there has been a correlation between high fuel costs and rural migration, the net effect of movement between various communities and centers is quite small.

Fuel price hike

Much of rural Alaska depends on fuel oil and diesel fuel for heating buildings and generating electricity. The extreme run up in the price of oil prior to 2014 caused considerable pain in many remote villages. And, given the difficulty of transporting fuel to these villages, especially in the winter, the fuel prices tend to become locked into whatever prices prevail at the time the annual fuel supplies are obtained. Moreover, transportation costs compound the fuel cost problem.

In some regions, in particular on the North Slope where there is access to natural gas, the fuel price situation has not been as dire. So, in the interest of restricting its results to regions where the fuel prices have been high, the ISER researchers only analyzed data for regions of western and northern Alaska that lack road or year-round water access. Regional hubs studied consist of Dillingham, Bethel, Nome, Utqiagvik and Kotzebue.

The researchers used anonymous data from Alaska Permanent Fund dividend applications to determine adult population levels in different communities from 2003 to 2015 and to determine how many people had moved to and from villages, regional hubs and urban centers each year during that period. Migration patterns considered included movements between villages in the same general area, movements between areas, movements out of rural Alaska, and movements between regional hubs and areas outside a high-cost rural region.

Statistical correlations

The study involved calculating statistical correlations between these data and fuel prices, the size of the labor force in each community, the ratio of employment levels to the labor force, and the average earnings per employed person. The researchers conducted statistical tests to assess the extent to which any correlations resulted simply from general trends over time. And data for people employed as teachers, seafood processing workers, oil workers, mining workers, construction workers and pilots were excluded, since these people tend not to be long-term rural residents.

The statistical analysis indicated that, while high fuel prices have impacted migration patterns within Alaska, the effects are subtle and complex. In general, high fuel prices tend to motivate rural Alaska residents to move from communities with high oil prices to places where prices are lower. But the overall effect is quite small.

Rather than inducing people from small villages to move to urban centers, the high fuel prices tended to be associated with increased movement within rural Alaska, both from villages to regional hubs and from regional hubs to villages. And increased movement to urban Alaska in response to higher fuel prices came entirely from the regional hubs, the ISER report says. In 2008, at the peak of the fuel price climb, the number of people moving from regional hubs to urban Alaska increased by about 180, while the small number of moves from villages to regional hubs was balanced by an increase in the number of moves from the hubs to the villages.

Small effect

Overall, the results confirmed a stepping-stone effect, where villagers ending up in urban centers migrated first to regional hubs. However, the overall impact of fuel prices on village populations was quite small - local labor market conditions, individual employment status and earnings levels had a much larger impact on migration than did fuel prices, the ISER study found. In particular, high earners tended to be more mobile than people with lower incomes.

In addition, many urban Native Alaskans move from urban areas to rural Alaska each year, the ISER report says.

“Energy costs represent one of many factors affecting decisions to move,” the report says. “Our results suggest that high fuel prices were apparently not a salient factor in those decisions for most rural Alaska residents, although they may have had a modest incremental effect for residents of regional hub communities.”






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