Since President Trump took office, the price of a barrel of oil from Alaska has declined about 10%, and the Trump administration would like the price to drop even more. The administration has called for $50-per-barrel oil as an effort to curb inflation.
But an executive order Trump signed on his first day back in office is titled “Unleashing Alaska’s Extraordinary Resource Potential,” which calls for new oil and gas leases in the Arctic National Wildlife Refuge, and building roads to mining sites in rural Alaska.
Longtime oil and gas analyst, Brad Keithley, said those two goals– to develop more resources and lower the price of oil– are at odds.
“I mean, you drive the price of oil down, you're undermining the economics of projects,” Keithley said. “We're already seeing that show up in the fracking plays in terms of reduced investment, reduced production, reduced drilling, as the price of oil has gone down.”
Oil is the largest component of Alaska's economy, and Keithley said falling prices could have a big impact on oil companies in the state.
“If Trump is successful driving the short term price of oil down, you know, he will do things to try to keep the short term price of oil price down,” Keithley said. “That will affect the economics of the projects that people are evaluating.”
The oil and gas industry supports about a quarter of Alaska jobs, according to the Resource Development Council.
President and CEO of the Alaska Oil and Gas Association ,Kara Moriarty, said she’s excited about the president’s goal to develop Alaska resources. She said it’s a welcome change from the Biden Administration and it’s still possible with lower oil prices.
“As the administration is trying to focus on unleashing access, improved regulatory process and infrastructure, all of those things can also help with the cost of doing business,” she said.
Moriarty said the Trump administration’s goal to streamline the regulatory process will save companies money. But she said when the price of oil drops, the industry will constrict spending and limit investing in new development.
“The only thing we can guarantee about price is it's going to go up and it's going to go down, and we never know when that's going to be,” Moriarty said. “I think, the challenge for Alaska, when it does come to price however, is that Alaska is such an expensive place to do business.”
The average cost to transport a barrel of oil from the North Slope to Valdez, Moriarty said, is over $9 a barrel. She said it costs about $35 to move that barrel from the ground to the pipeline. Add those up and it doesn’t leave companies much room to make a profit if oil dips to $50.
Moriarty said companies will restrict exploration work first.
“Because they don't have any money coming in,” she said. “The fields that are already invested in, and already producing, those fields can kind of weather a little bit better the price swings of the industry. And the industry is kind of built on that.”
For much of 2020, oil prices were below the $50 threshold, and even fell to negative levels for a short period. The state lost more than 3,000 oil and gas jobs that year. Then in 2022, oil prices spiked to over $100 after Russia’s invasion of Ukraine.
Oil hasn’t fallen below $50 since early 2021, according to data from the Energy Information Administration. If that happens again, retired state economist Neal Fried said the severity of impacts largely depend on how low prices get, and for how long.
“If they last a year, you can probably get through it. But they might last for years,” he said. “For example, in the 90s, where we had low prices for so long, we lost all kinds of jobs, and even though the state got through it, it was pretty tough.”
Fried said high oil prices are the most important thing when it comes to investment and growth in the industry.
