Research Matters #52: Oil Pumps Alaska’s Economy to Twice the Size—But What’s Ahead?

Think about this: if oil had never been discovered on the North Slope, Alaska’s economy today would be about half as big. And to keep the economy healthy as time goes on, Alaska needs new oil production: nothing else—including North Slope natural gas—can replace oil in the state’s economy. These are the findings of a new paper by Scott Goldsmith, professor of economics at ISER.

• Oil wealth has had huge “spinoff” effects on Alaska—broad economic effects that benefit virtually every household, community, and business in Alaska. Those spinoffs include an economy and population that are twice the size they’d otherwise be—and the highest per capita public spending in the country, coupled with the lowest state taxes on households and many types of businesses.

• Spinoffs of oil wealth have helped non-oil sectors of the economy prosper and create about 60,000 more jobs than they otherwise could have. Those jobs are in addition to the roughly 127,000 jobs generated by oil production and state spending of its oil revenues. Together, all the jobs that can be traced in some way to oil development make up half of all jobs in Alaska.

• On average, an Alaska family of four enjoyed an estimated value of $22,000 from oil wealth in 2010—in tax relief, Permanent Fund dividends, and enhanced public services.

• Other sectors will be important for Alaska’s future growth, but oil will remain the state’s main economic driver—so Alaska needs to develop a strategy that will provide the greatest long-term benefits from future oil production for the state, the economy, and Alaskans.

See the full paper at http://iser.uaa.alaska.edu/Publications/oiltransformfinal.pdf

For questions: Scott Goldsmith 907-786-7720 or afosg2@uaa.alaska.edu

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