Alaska is down thousands of oil and gas jobs as the pandemic continues to squash demand

The Trans-Alaska Pipeline runs alongside the Dalton Highway, carrying oil from Prudhoe Bay to Valdez. (Abbey Collins/Alaska Public Media)

Alaska has lost more than 3,000 oil and gas jobs since January. With mostly stagnant oil prices in the forecast for the foreseeable future, it’s unclear when or if those jobs will return to the labor market.

In the spring, as the pandemic began shutting down cities around the world, demand for oil plummeted. At the same time, a price war led to a surplus of oil on the global market. And then, for the first time ever, a key benchmark for the price of oil fell into the negatives.

“I don’t want to call it a perfect storm, but business in general doesn’t like uncertainty,” said economist Mouhcine Guettabi, with the University of Alaska Anchorage’s Institute of Social and Economic Research. “And we’ve had a combination of demand decline coupled with a lot of uncertainty.”

In Alaska, that’s translated to the loss of thousands of jobs.

Data from the Alaska Department of Labor show an estimated 6,900 jobs in the state’s oil and gas industry in September. That’s down from 10,000 in January. Job numbers haven’t been this low for more than 30 years.

Guettabi says when a big employer like the oil and gas industry experiences job loss of this magnitude,  there are widespread ripple effects in other areas of the economy. From other industries that work with oil companies, to money that employees spend on goods and services.

“When you have sustained losses in a sector that pays a lot of money, that’s connected to a lot of aspects of the economy, it’s going to be felt,” said Guettabi. “And you’ll have to multiply those original losses by some factor.”

Guettabi says oil prices in recent months have essentially taken the shape of a square root — they bounced back somewhat after that brief dip into the negatives. But since then, they’ve stalled out around $40 per barrel, give or take a few dollars.

“Unless oil prices get back to some very, very high level, I don’t see anything on the horizon that thousands of thousands of jobs are going to get created in Alaska over the next year or two years,” said Guettabi.

And, while it’s hard for experts to predict exactly where prices are headed, given the uncertain nature of the pandemic, a big increase in oil prices is not expected any time soon.

“Nobody believes it’s going to last forever,” said Kara Moriarty. President and CEO of the Alaska Oil and Gas Association. “But if you look at price forecasts from the Department of Revenue or the Energy Information Administration, this $40-$45 oil seems like it’s going to be here for a few years. In fact, the Department of Revenue doesn’t even show prices in the mid-50s until eight, nine, 10 years from now.”

For some perspective, Moriarty said, “For some companies the average cost to produce and transport a barrel of oil is in the $30-$35 range. So $40 is not a lot.”

Moriarty described a “double whammy” for the industry this year, between the pandemic and the oil price war.

“You saw companies, for safety reasons, get people off the slope, cut back, quit doing a lot of activity. So that meant a loss of contractor and direct jobs,” said Moriarty.

Alaska is not alone. Moriarty points out that job losses have been spread throughout the industry. But there are parts of doing business in Alaska that make the situation more challenging.

“It’s one of those things. The industry will have to adjust how to be more efficient,” said Moriarty. “And I think that’s for the state of Alaska, challenging when there’s places in the lower 48 that certainly can be a lot more profitable at lower oil prices than we are.”

Moriarty did point to what she called one good sign for jobs: Ballot Measure 1, which aimed to raise taxes on Alaska’s largest oil fields, is failing by a wide margin. Moriarty is the campaign manager for the group opposing the measure. She says if those taxes were imposed, companies would cut production and that would trickle down to jobs.

“If we do prevail and we do defeat the ballot initiative, then that type of activity has the likelihood of moving forward to offer a more stable place both in drilling opportunities in the existing fields as well as new fields,” said Moriarty.

Supporters of the measure argued taxing these companies would be a better deal for Alaskans in the long run. And, they argued, oil companies would still make money in Alaska.

The big question now, says Guettabi: is this is a temporary shift, or is it the future?

“Is it the new normal or is it the normal we’re currently observing because oil prices are at $40,” said Guettabi.

Even if oil prices rebound to pre-pandemic levels, those prices were still fairly low, historically. And, Guettabi says, jobs typically lag behind price recovery. The good news? Guettabi says it’s likely job numbers have hit rock bottom for now, meaning the state will see some of those jobs return to the industry, if slowly.