Which U.S. States Win and Lose Most From Falling Oil Prices?
10/11/14
Michael Levi
Energy, United States
“When oil prices collapsed to near about eleven dollars per barrel in 1986, the Texas economy went into a deep recession for two years."
Oil prices are plunging. Which U.S. states will benefit most – and which are most at risk?
A study that the Council on Foreign Relations published
about a year ago looked at exactly this question. The research, by Mine
Yucel of the Dallas Fed and Stephen Brown of UNLV, ranked Wisconsin,
Minnesota, and Tennessee as the biggest potential winners, and Wyoming,
Oklahoma, and North Dakota as those with the most to lose.
Oil prices
have fallen by about twenty percent in the last few months. Brown and
Yucel combined statistical analysis of the historical relationship
between oil prices and employment with current data about state
economies to estimate what a twenty-five percent price rise would do
jobs. They note that the same analysis can generate insight into the
potential impact of a price plunge. This map,
which I’ve created by assuming that an oil price drop is as bad for
jobs as an oil price rise is good for employment (Brown and Yucel
discuss the value and limits of such an assumption in the paper), shows the results.
Brown and Yucel add some additional insight into the dynamics at work here:
“States
like Texas and Louisiana that have downstream oil and gas industries
that benefit from falling energy prices such as refining and
petrochemicals would be less affected. In addition, states in which
natural gas is more prominent than oil are likely to see less harm from
falling oil prices. With the recent weakening in the relationship
between oil and natural gas prices, a decline in oil prices does not
necessarily imply as big a change in natural gas prices as it once did,
lessening the effect of an oil price decline.”http://nationalinterest.org/blog/the-buzz/which-us-states-win-lose-most-falling-oil-prices-11458
They also provide historical perspective:
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