Are the energy states still energy states?

Mark Snead

Economic Review, 2009, vol. 94, issue Q IV, 43-68

Abstract: Traditional energy states managed to avoid the early stages of the recent national recession, buoyed by record high crude oil and natural gas prices. Both production and exploration for crude oil and natural gas expanded rapidly in response to the spike in energy prices, propelling strong job and income gains in the energy states. But the strong performance of the energy states through the early stages of the recession subsequently reversed itself under the weight of collapsing energy prices. These states began to underperform non-energy states by the second quarter of 2009. These gyrations in economic activity are reminiscent of the volatility experienced during the 1970s and early 1980s, suggesting that the energy cycle is alive and well in the energy states. ; Snead examines the economic performance of the energy states in the recent energy price spike and recessionary cycle. He finds that the economies of the energy states remain highly sensitive to changes in energy prices and follow a much different economic cycle than non-energy states. The energy states posted far stronger job growth prior to the recession, entered the recession much later and with more momentum, and have posted smaller cumulative job losses than non-energy states. Most of the energy states were nearly as reliant on the energy sector as a source of state earnings in 2008 as they were at the peak of the prior cycle in 1982. He also finds that the historical ranks of the energy states are poised for a shuffling. Unconventional natural gas production will move some states closer to the top as other states enter the ranks of the major oil and gas producers for the first time.

Date: 2009
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