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Oil plays tricks with Alaska GDP Price and production swings make the popular national metric an odd ball in Alaska but provide interesting points of comparison Eric Lidji For Petroleum News
That oil is the keystone of the Alaska economy isn’t surprising, but the details of that simple fact continue to offer insight into the role oil plays in the Alaska economy.
Of Alaska’s $49.12 billion gross domestic product in 2010, more than 25 percent came from the mining sector that in Alaska primarily consists of oil development, according to a recent analysis from the Alaska Department of Labor and Workforce Development.
While the national GDP is released quarterly and commands enormous attention, the annual Alaska GDP is “a relatively crude statistic that does provide some nice comparisons,” according to Neal Fried, the state economist responsible for the report.
The statistic is “crude,” no pun intended, because Alaska’s reliance on oil causes wild fluctuations in GDP from year to year that don’t translate to changes on the ground.
“You would never guess these wild swings by just living here,” he said.
For instance, while the inflation-adjusted state GDP shrunk in 2000, 2003 and 2005, employment and income in Alaska rose in those years. “That kind of year-to-year change at the national level would have spurred three near back-to-back recessions,” Fried wrote, but while oil accounts for a quarter of Alaska GDP — and even more once transportation and refining are added to the mix — it accounts for only 2 percent of national GDP.
While oil dominates the state GDP, the industry itself accounts for only 4 percent of statewide employment. In 2009, when employment and income in Alaska fell for the first time in more than two decades, high oil prices helped the state GDP grow 9 percent.
“This is an example of how year-to-year changes in Alaska’s GDP might say very little about what’s happening on the ground level of the state’s economy,” Fried wrote.
Changes over the decades Although oil has been central to the Alaska economy for decades, its importance fluctuates. The oil industry accounted for only 14 percent of state GDP in 1970, before Prudhoe Bay, but passed 50 percent in the mid-1980s, when oil production peaked.
After experiencing little growth in the 1990s, the Alaska GDP grew at 3 percent annually in the 2000s, compared to 2 percent growth nationally over the past decade. That recent rise, though, pales in comparison to the double-digit annual growth in GDP that Alaska experienced in the 1960s and 1970s, when oil, fishing and tourism all expanded at once.
While other states depend on natural resources, none depend on them as much as Alaska. That oil development gave Alaska the highest per capita GDP in the nation in 2010, $63,424. Of the other states in the top 10, only Wyoming and Colorado are major producers of natural resources. The others, aside from California, are all on the East Coast.
That dependence on oil, though, means that “a lot of this GDP value does not accrue to Alaska,” Fried said, but instead goes to the shareholders of corporations that work here.
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