Alaska's interesting relationship with oil: an inverse pattern between employment and production.

• Author: Miller, Amy
• Position: ALASKA TRENDS

There is an interesting--and at times difficult to discern--relationship between production, prices, and employment in Alaska's oil industry, as the charts illustrate. While a five-year period is a relative blink of the eye when it comes to identifying trends in an industry with as long of lead times as the oil industry, a glimpse of the larger picture is still visible here. For example, in the last five years, there's a perceptible decline in production, as most Alaskans have probably heard. Meanwhile, prices climbed from less than $40 per barrel to well over $100 during this time period and have been holding steady at around $100 per barrel since early 2011. But perhaps most interestingly, although production has declined, employment in Alaska's oil and gas industry has increased. What does this mean?

While there are many complex factors, most likely price is the single biggest factor. When Alaska's oil production was at its peak of more than 759 million barrels in 1988, employment stood in the 8,000-jobs range. Yet at the time, the price of Alaska's oil was just $13.51 per barrel. In 2013, with production at less than a third of 1988 levels (approximately 205 million barrels), employment was 14,100, and Alaska's oil was fetching $107.63 per barrel. According to the Alaska Department of Labor and Workforce Development, another reason for the inverse pattern between employment and production is that Alaska's aging fields require more and more labor to extract their reserves.

Interestingly, although Alaska produces 8 percent of the domestic oil supply in the United States, less than 3 percent of the domestic oil and gas employment is located here. Again, according to the Department of Labor, there are several reasons for that.

First, Alaska's largest oil field, Prudhoe Bay, requires relatively low employment to function. Secondly, in other states, there are a variety of small, medium, and large fields with associated jobs, but in Alaska there are only large fields.

On a related note, other oil-producing states have more oil and gas establishments. If Alaska's oil was not as remote and logistically difficult to extract, more of it would probably be developed; in effect, what might be worth developing in Louisiana or Oklahoma is not worth the effort and expense in Alaska.

Alaska also has fewer corporate jobs in the industry than in places like Texas. Finally, Alaska has fewer downstream operations and far less refining activity than in other states.

Alaska Trends, an outline of significant statewide statistics, is provided by the University of Alaska Center for Economic Development.

Indicator Units Period EMPLOYMENT Oil & Gas Thousands January Alaska Thousands January Labor Force Alaska Thousands January Unemployment Rate Alaska Percent January PETROLEUM Crude Oil Production--Alaska Millions of Barrels January Natural Gas Field...