Map: Which states get hurt most by plunging oil prices?

http://www.vox.com/2014/10/9/6952533/oil-prices-falling-map-states-employment-north-dakota-texas

The price of oil is dropping sharply. And a number of US states reliant on oil and gas drilling could get hurt as a result. Wyoming, Oklahoma, and North Dakota face the biggest economic risks. But so do Alaska, Louisiana, Texas, West Virginia, and New Mexico. Wyoming, Oklahoma, and North Dakota would get hardest hit by a decline Global oil prices have been plummeting of late, dropping roughly 20 percent since June. And many analysts think prices could keep declining in the months ahead. There are a few reasons for that: The US fracking boom has produced a glut of new crude over the years. The oil industries in conflict-torn countries like Libya and Iraq have now begun to rebound somewhat. And demand is weakening in places like Germany and China. That’s all nudging prices downward. So what do falling oil prices mean for the United States? It varies. For many consumers, cheaper gasoline will mean people can spend a bit less money on fuel and a bit more money on other things. That’s moderately good news. But the story doesn’t end there… Nine states are especially sensitive to oil price swings The price plunge poses economic risks for states that are particularly dependent on oil drilling — particularly Wyoming, Oklahoma, North Dakota, Alaska, and Texas. Back in October 2013, a report from the Council on Foreign Relations took a look at which states were most sensitive to changes in the price of oil When crude oil prices increase, the authors found, the states in red get hurt a bit, thanks to higher energy costs. But the states in green end up benefitting — since higher prices make it profitable to have more drilling production. That means more jobs. States in green get hit hardest by falling oil prices: (Council on Foreign Relations) Except suddenly we’re in a world where prices are falling, so everything is flipped. The states in red above all benefit from lower energy costs. Meanwhile, the green states get hurt — as oil prices plunge, some of the more costly and difficult drilling endeavors in shale formations become unprofitable and have to shut down. That increases unemployment. Texas saw a similar crash in the early 1980s after oil prices declined Here’s the bottom line: "[F]alling oil prices would cause overall employment losses in Wyoming, Oklahoma, North Dakota, Alaska, Louisiana, Texas, West Virginia, and New Mexico, with the greatest percentage losses in the first three." (Note that Texas is easily America’s biggest oil producer, but it’s not the hardest hit, because its economy is more diversified.) This sort of boom and bust is hardly unprecedented. Between 1979 and 1982, global oil prices increased tenfold thanks to decreased output after the Iranian Revolution. Texas, a major oil-producing state, benefitted hugely — growing at a torrid 7.5 percent annual rate during that time. But then prices crashed in 1982, and Texas’ economy crashed along with it, falling into a deep two-year recession. The authors of the CFR report, Stephen Brown of the University of Nevada, Las Vegas and Mine Yucel of the Federal Reserve Bank of Dallas, note that many US states can weather large swings in the price of oil fairly well. California is the nation’s third-biggest oil producer, but it has a huge, diverse economy alongside those wells. "At the same time," the authors note, "the growing prominence of energy production can make states with small, undiversified economies more susceptible to an economic downturn during an energy price decline." (Thanks to Michael Levi on Twitter for pointing out the CFR study.) Further reading: Oil prices are plummeting. Here’s why that’s a huge deal.

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