Anchorage Daily News

When North Slope oil production peaked 20 years ago, around 8,500 people worked in the Alaska oil industry. With production today down 70 percent from those highs, the oil industry now employs around 12,600 people in Alaska, a record for the state.

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The difference? The price of oil today is five times higher than the price in 1988.

Over the past two decades, the growth and contraction of oil industry employment in Alaska has moved nearly in lockstep with global oil prices, despite statewide production rates declining almost every year and a variety of tax and royalty systems.

The jobs figures come from a new report by the Alaska Department of Labor and Workforce Development that examines the role the oil industry plays as an employer in Alaska, both compared with other industries in the state and to other oil producing states across the country, such as Texas, Louisiana, California and Wyoming.

"We have record numbers of people in Prudhoe Bay, and we're producing a third as much oil," said Neal Fried, the state labor economist who wrote the report. "I just find that fascinating."

The report shows Alaska entering a phase where oil production is spread across more fields, and producing oil from the old giants requires more workers than ever before. Also, while Alaska follows national employment trends, it often lags behind the Lower 48.

As an employer, the Alaska oil industry makes big waves with small numbers.

The roughly 13,000 people employed by oil companies and the oil field support industry in Alaska make up only 4 percent of the statewide work force, but collect around 10 percent of all wages earned in the state because they're paid so well. Moreover, oil and gas production accounts for nearly 30 percent of the total gross state product.

PRICES DRIVE JOBS

Nationally, oil prices have long driven employment, despite production rates.

Take Wyoming, a major gas producing state with a long history of oil production.

When employment fell to 6,250 in 1971, the state produced around 150 million barrels of oil at an average price of $4 a barrel. A decade later, with prices closer to $35 a barrel, employment peaked at 22,500, even though production dropped to 120 million barrels.

The recent spike in oil industry jobs in Alaska comes during an extended run-up in prices, which have doubled over the past two years, and jumped five times since 2001.

"If we're looking at $50 oil, I'm sure employment would not have grown the way it did," Fried said. "Maybe it wouldn't have grown at all, or grown very little."

Something similar happened in the years immediately following the peak of Alaska oil production in 1988. The first Gulf War pushed prices up around the world, and by 1991, with oil production down 10 percent, oil industry employment in Alaska reached 10,700 jobs, a milestone unsurpassed for 15 years.

In 1998, with prices averaging around $19 a barrel and production declines gaining momentum, oil companies started developing a slate of new North Slope fields like Alpine, Tarn and Badami, leading to the first year of major jobs growth since 1991.

But as oil prices fell 30 percent that year, down to $13 per barrel, record jobs losses followed. Oil industry employment dropped below 8,000 for the first time since 1983. Prices and employment don't always run along parallel tracks, either. Between 1994 and 1998, the oil industry in Alaska gradually lost jobs even as oil prices slightly rose, albeit remaining at or near historical lows.

ALASKA LAGS LOWER 48

But while fluctuating oil prices often predict jobs growth and loss, Alaska usually lags behind other oil-producing states in jobs growth.

Last year, Texas produced nearly twice as much oil as Alaska, but employed nearly 17 times as many people. Some of that can be attributed to the oil company headquarters based around Houston and Dallas, but California under-produced Alaska by 8 percent last year but still employed 60 percent more people within the industry.

Unlike the mix of large and small oil fields dotted across Texas and California, Alaska's production is dominated by two mega fields: Prudhoe Bay and Kuparuk.

So while Alaska supplied 14.5 percent of the total oil produced domestically last year, the state is home to just 0.3 percent of the nation's total production sites. This is probably why Alaska employed less than 3 percent of the oil and gas work force in the country in 2007. Employment at Prudhoe Bay remained fairly steady between 1990 and 2004, despite a steady decline in oil production. Some of that is starting to change though.

The past three years have seen work to bring Alpine satellites on line, to develop previously uneconomic heavy and viscous oil resources and to replace corroded pipelines at Prudhoe Bay, as well as unprecedented activity by independents and new players.

While the support industry continues to grow much faster across the Lower 48, Alaska outpaced the rest of the country in jobs growth among oil producers through the first seven years of the decade.

Following those 15 years of steady employment, the Prudhoe Bay work force jumped 50 percent between 2004 and last year, topping 9,000 people.

"It takes more people to get a barrel of oil out of the ground," said Bill Popp, chief executive of the Anchorage Economic Development Corp. "The days of easy oil are behind us."

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