ANCHORAGE — The U.S. state of Alaska is, for the moment, distant from the worst medical ravages of the coronavirus pandemic. But its economy is in critical condition.
Alaska is especially vulnerable because it depends on oil, tourism and fisheries — basic industries that are reeling from the global coronavirus pandemic — and the state government gets most of its revenue from investment earnings that have now evaporated.
“Alaska is experiencing a perfect storm, a most terrible trifecta, the hat trick from hell,” said state Senator Natasha von Imhof, co-chair of the Senate Finance Committee, at a hearing Saturday. “We are being hit on all sides with the stock market crash, oil prices plummeting and the tourism and fishing season all but idle.”
As of Monday morning, there are only 32 cases of coronavirus in Alaska out of nearly 40,000 in the United States. But the pandemic has caused demand for fuels to drop precipitously, shuttered businesses and kept residents in their homes. Oil prices have cratered, with the U.S. price of oil falling to $23 a barrel as of Friday.
The price drop will cost the treasury $500 million to $700 million immediately, said Mouhcine Guettabi, an economist with the University of Alaska Anchorage’s Institute of Social and Economic Research.
The state’s oil-wealth fund, the largest source of revenue for state operations, is reeling. With the stock-market crash, the Alaska Permanent Fund lost about a tenth of its value in a little over two weeks, according to managers. As of March 16, its value stood at $58.7 billion, managers said.
Big oil companies have already announced cutbacks to Alaska investments and staffing in the North Slope. ConocoPhillips, Alaska’s top oil producer, said spending reductions will reduce North Slope output by 2,000 barrels per day, and the company this week imposed a two-week suspension on its flights to the North Slope, limiting the workforce there to “essential” personnel.
The tourist season, which several communities depend on for most of their year’s income, is shaping up to be a bust. Cruise companies have already canceled sailings, a huge blow to employers that depend on cruise passengers for their income.
The seafood industry, the state’s largest private-sector employer, is facing a dearth of processing-plant workers, a large percentage of whom come from outside the United States.
Only a few months ago, the economic outlook was rosier. The state was pulling out of a prolonged recession that saw its population shrink for three straight years.
ConocoPhillips had announced its biggest North Slope winter exploration season in decades. It and other oil companies were welcoming Trump administration plans to open federal lands, including the Arctic National Wildlife Refuge, to development. Alaska produces about 500,000 barrels per day, down from 2 million bpd 30 years ago, and its break-even cost is about $39 a barrel.
Now, Alaska might not be able to afford the normal annual Permanent Fund dividend paid in the fall and balance the budget at the same time, according to a legislative analysis.
Governor Mike Dunleavy on Friday proposed an emergency April payment from the fund of $1,306 to all Alaskans. Some lawmakers were cool to that idea, though.
“Draining the Permanent Fund to pay supersized dividends would be monumentally irresponsible @GovDunleavy at a time when our savings accounts are nearly empty and we must maintain funding for core health, safety,” state Representative Zach Fields said on Twitter.