A new report from the Federal Reserve Bank of Kansas City knocks down a perception that energy states could recover from the recession faster than non-energy states.
The report, by Mark C. Snead of the bank’s Denver office, says that energy states typically enter recessions late and exit early as energy prices recover along with the rest of the overall national economy. But he concludes that “continued weakness in natural gas prices suggests that a rapid recovery well ahead of the non-energy states seems unlikely in the current cycle.”
Nowhere is that more true than in Oklahoma, which is confronting the worst budget crisis in modern history, according to The Oklahoman newspaper. The state has been battered by the decline in natural gas prices. Other major natural gas-producing states whose revenues have affected by low prices are Texas, Wyoming, New Mexico, Louisiana and Colorado.
Snead, the assistant vice president, branch executive and economist at the Kansas City Fed, does a nice job defining which states are energy states and how they have fared historically in economic downturns.
He identifies a “top tier” of energy states: Alaska, Louisiana, Oklahoma, Texas and Wyoming. The second tier is New Mexico, Colorado, West Virginia, Kansas, Mississippi, Montana, North Dakota and Utah. Snead says Kansas and Mississippi have limited exploration opportunities and are “slowly shedding” energy state status while Utah has all but lost its position. New energy states on the horizon with immense shale gas formations are Arkansas and Kentucky, the report says.
Though not all energy states are positioned to lead the nation in the recovery, several of them are financially stronger than non-energy states, especially Texas, North Dakota, Alaska and Montana. In fact, North Dakota and Alaska were the top two states in job growth during the recession.