Oil prices have been in freefall in recent months, dropping by more than half since June. For energy states that’s bad news. As Wyoming Governor Matt Mead pointed out recently, there’s a lot of money riding on oil.
“For every $5 decrease in a barrel of oil, it’s $35 million for the State of Wyoming.”
The American West has a long tradition of booms and busts, and in some states, like North Dakota and Wyoming, they continue to be a defining feature of the economy. But do they have to be? Wyoming Public Radio’s Stephanie Joyce reports for Inside Energy.
SCRIPT:
At the Cyclone Drilling offices in Gillette, Wyoming, brothers Patrick and Paul Hladky are arguing over who should to talk to the reporter.
“Paul: I do not wish to be on the radio… and I mean that sincerely… but my brother here. ”
The Hladky brothers are in surprisingly good spirits, given that it has not been a very good month for them. Cyclone is one of the largest drillers in the state, but falling oil prices have forced them to start idling rigs. Paul Hladky says he’s expecting a quarter of the company’s rigs will be sidelined in 2015.
“I’d say that I’d feel fortunate if that was all we see idling.”
But Hladky is less worried about that than you might expect.
“When you’re in oil and gas you realize that there’s going to be highs and there’s going to be lows and you prepare yourself for the lows. If you’re not prepared, you’re not going to be in business very long.”
That’s a lesson states like Wyoming, North Dakota and Alaska have taken to heart. These days, they all have sizeable saving accounts for when prices drop. But a few decades ago, things were different, as author and journalist Samuel Western learned at a party several years back, when someone told him that at one point in the 1970s, Wyoming had just $100 in its bank account.
“And I said, ‘that’s got to be apocryphal, that just can’t happen… and yet, when I interviewed former governor Stan Hathaway, it was not $100, it was $80 in the general fund. So I kind of said, ‘how could that possibly be with all our mineral resources?’”
It was around that time that Wyoming started saving some of its mineral revenues -- to even out the cycle. But Western says those in power haven’t forgotten that history -- and that the memory has shaped a survivalist mentality about the economy.
“You become a stasher, you want to hide your money in coffee cans -- and we still do that in Wyoming. We’re still afraid that we’re not just not going to have enough that we’re going to survive and that we won’t go back to those old days again.”
But Western says all the stashing just hides the underlying problem -- namely that the economy of the state runs on one thing -- minerals. He argues that getting out of the cycle takes more than saving... and points to Texas, which back in the 1980s was as dependent on mineral wealth as Wyoming is today.
“They’ve taken… exactly what I would hope society would do. Take revenues, oil revenues, and then build societies and industries and business that are not related to energy.”
And it’s not just Texas that’s diversified and become less dependent on minerals. Stephen Brown is an economist at the University of Nevada who has studied the impact of oil prices on state economies. He says virtually every state has become less dependent on mineral revenues since the oil crash of the 1980s.
“What we’re seeing is that states are becoming more and more alike and less driven by these boom and bust cycles.”
But Brown says a few states still stand out for their reliance on mineral wealth -- Alaska and Wyoming being at the top of the list. Bill Schilling would really rather Wyoming were not near the top of that list. Schilling is the president of the Wyoming Business Alliance, which has its roots in the coal industry. He credits energy revenues for the state’s roads and school and highways… but also says the state needs other industries -- especially now.
“There are some clouds on the horizon.”
But diversification is a tricky thing. And everyone interviewed for this story had a different excuse for why Wyoming hasn’t managed that trick yet -- and a different strategy for getting there.
“We need people who can be programmers, we need people who can build things, we need manufacturing. I mean, we need all of those things.”
And Schilling sees Wyoming heading down that path -- albeit slowly. He points to state-sponsored scholarships and the expansion of the University’s business school as positive developments. But he says more of that is needed.
“What we are today is going not to be good enough for what we need to be tomorrow.”
And with Wyoming main economic drivers -- coal, oil and natural gas -- all in a slump, tomorrow may be here sooner rather than later.
