The cautious optimism with which economists approached Alaska's 2019 economy turned out to be well-founded, with most experts indicating that the Last Frontier has turned the corner and in 2020 will claw its way out of the recession that followed tumbling oil prices several years ago. However, the recovery is not expected to be uniform, as Anchorage remains in recession and many of the impacts of the state's budget cuts have yet to play out.
Oil & Gas Optimism
"The most recent macro-economic indicators show Alaska's economy has begun to grow again and add jobs. In the near-term, there is concern over the effect of state government budget cuts," Northrim Bank EVP, Chief Credit Officer, and Bank Economist Mark Edwards says. "However, there is renewed optimism in the private sector that a number of large-scale natural resource development projects are advancing and new discoveries of oil and gas are increasing investment activity for exploration and development."
As of August, the oil and gas industry had grown by 500 jobs (5.3 percent) when compared to the same month in 2018, according to the Alaska Department of Labor and Workforce Development. An additional bolster to the oil and gas industry has been the stability of oil prices. ANS West Coast oil prices averaged between $60 and $72 in 2019 with the State Department of Revenue forecasting an annual average ANS oil price of $68. Projections put the average for FY2020 at $66 per barrel.
"On the oil front, there are promising projects and oil prices have stabilized, which should help," says Mouhcine Guettabi, an associate professor of economics at the Institute of Social and Economic Research. "Oil remains Alaska's most important economic base and its recovery will surely help the rest of the economy."
However, according to the Anchorage Economic Development Corporation's 2019 3-Year Outlook Report released in July, employment in oil and gas is unlikely to return to pre-recession levels in the near-term. Nonetheless, the report shows that robust activity on the North Slope is an encouraging sign of optimism among producers.
The Alaska Department of Revenue forecasts production on the North Slope, after a decline in FY2019 of 1.3 percent, will rise by 3.5 percent in 2020.
The AEDC report also indicates that North Slope oil production is expected to average 530,000 barrels per day in FY2019 before declining to about 491,000 barrels per day by FY2022.
"Production is anticipated to rebound to above 500.000 barrels per day in the late-2020s as several key projects come online," the report states.
But job numbers aren't as strong as dollars invested, AEDC President and CEO Bill Popp warns, noting that production nationwide is up by a third more oil than pre-recession, yet...