A lot of attention in the US is paid to the economic impact the crash in oil prices has had on states like Texas, North Dakota, and Oklahoma.
But Alaska, the largest state in the US by land mass, is also feeling the pain from oil prices that have collapsed in the last 18 months.
In a note on Monday, Morgan Stanley’s municipal bond team looked at the revenue shortfall facing Alaska, Louisiana, Oklahoma, and Texas as a result of lower oil prices and lower business activity.
And while Texas is often the headline state we talk about when we talk about bad news for US oil companies, no state has a larger per cent of GDP — or is facing a bigger decline in tax revenue — than Alaska.
Morgan Stanley notes that the situation in Alaska has led its governor to call for an income for the first time in state history.
Employment in the oil and gas sector in Alaska has started to roll over as well, falling 6% from a year ago in November with total employment as of November about equal to where it was at the start of 2014.
Alaska, along with Louisiana, has also called special legislative sessions to address the problem, Morgan Stanley notes. Oklahoma has also imposed budget cuts.
And of course the problem for all these states is the assumptions they’d made on where oil prices would be over the next three years. Each of these states — as almost every company and country did, too — way overestimated where prices would when making forecasts in 2014. These states then overshot again in budget assumptions made last November.
And the latest collapse in oil prices means these numbers will have to come down once more.