The state is heavily reliant on income from the oil industry to balance its books. The Alaska Oil and Gas Association estimates that a third of the state’s jobs are tied to the industry in some way, mostly in fields on the state’s North Slope.
In most recent years, revenue from the oil industry has accounted for 40 percent of the state’s revenue each year. In 2014, that fell to about a third. This year, it’s projected to be less than a quarter.
There are two big reasons for this. The first is that oil production has been steadily declining for years.
But a bad situation became terrible last year, as the price of oil per barrel collapsed.
The reason for that price collapse is complicated. Oil prices are linked tightly to the global market, and a drop in demand and increased instability in oil-producing countries (like Syria) played a role. But as the Economist reported in December, OPEC decided against cutting their own production in an effort to keep prices high. (Supply and demand, etc.) It’s fair to assume that the decision was in part punitive, an attempt to shut down parts of the booming American oil industry which need high prices to be economically sustainable. (Or, to be direct: To lop off part of the fracking industry.) That decision, driven largely by Saudi Arabia, kept oil prices low everywhere, including in Alaska.
It’s overly simple to blame the likely state worker layoffs in Alaska on one source. But there’s little question that when and if those layoffs occur, the unrelated decisions of oil titans in the Middle East played a not-insignificant role.
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