Alaskanomics

Anchorage Inflation Rate Rose 1.8% in 2010

The consumer price index for Anchorage rose 1.8% in 2010. Anchorage is the only community in Alaska tracked by the Federal Bureau of Labor Statistics, which reports on local inflation every six months. Inflation forces were stronger in the first half of the year, rising 2.5% year-over-year for the prior 12 months. However, by year end 2010 the rate was lower mainly due to a 0.1% decrease in food prices and a 0.9% decrease in the energy index. There was a 14.1% decrease in natural gas prices and a 7.1% decrease in electricity prices, while gasoline rose 5.6% from a year ago.

Housing costs are the largest component of personal spending and they climbed 2.3% in 2010. Medical care rose 5.3%, Recreation and Entertainment added 1.4% and Clothing 0.4%. Household furnishings declined 0.2%.

Nationally, inflation rose 1.5% in 2010. Housing shelter only increased 0.4% due to flat home prices and rents, while Energy climbed 7.7%. Food was up 1.5% and Medical Care rose 3.4%.

Video Clip: Healthcare is Bright Spot for Construction Industry

One of the bright spots in construction spending in 2011 is expected to be associated with healthcare according to UAA Professor of Economics Scott Goldsmith of the Institute of Social and Economic Research during his presentation at the Associated General Contractors annual Alaska Construction Spending Forecast recently. To read the full report, click here.

How Much Should Alaska Save?

A new analysis by Scott Goldsmith, professor of economics at the Institute of Social and Economic Research (ISER) at the University of Alaska Anchorage, examines the issue of preserving petroleum wealth for future generations of Alaskans.

Almost all of Alaska’s state revenues come from oil, and since production is declining, it is important that some is set aside for future needs. But how much of current petroleum revenues can Alaska afford to set aside, while also ensuring there is enough to meet present spending needs? Goldsmith offers an answer based on the current value of our financial assets and future projected petroleum revenues, using the most recent Alaska Department of Revenue forecast.

His study finds that Alaska could spend as much as $5 billion annually from petroleum wealth and still conserve the value of that wealth for future generations. Currently the state is spending more than $5 billion per year, and is therefore gradually eroding the value of our petroleum wealth and passing a fiscal burden on to future generations. Goldsmith advises that state spending above $5 billion should be paid for with non-petroleum taxes and other revenues. Goldsmith writes “In that way each generation would share equally in the benefits of our wealth and share equitability the responsibility of paying for the public services it enjoys.”

To read the full report, click here.

This report is part of ISER’s Investing for Alaska’s Future research initiative, funded by a grant from Northrim Bank.

Video Clip: Projected Construction Activity in the Mining Industry

Economist Scott Goldsmith from the Institute for Social and Economic Research discusses expected construction spending and activity in 2011 in the mining industry. He presented his research at the Associated General Contractors annual Alaska Construction Spending Forecast. To read the full report, click here.

Alaska Needs 8,100 New Science & Technology Workers in Next Ten Years

The Alaska Department of Labor (DOL), in its February Trends publication, analyzed Alaska's "STEM" (Science, Technology, Engineering and Math) workforce and found that Alaska will need 8,100 new workers in this category - 2,700 new positions and 5,400 replacements for workers who retire or otherwise leave the workforce - by 2018.

DOL identified STEM occupations in eight broad categories - business and finance; computer and math science; architects; surveyors and cartographers; engineers; social scientists; life and physical scientists; and postsecondary teachers. DOL also included an "All Other" category with a variety of occupations requiring STEM skills.

To read the full report, click here.

Video Clip: John MacKinnon on Expenditures and Taxes in the Oil and Gas Industry

Associated General Contractors’ Executive Director John MacKinnon discusses the seven-year-trend of expenditures in the oil and gas industry, how that money is being spent, and how it affects the state’s economy and the construction industry. This was presented at AGC’s annual Alaska Construction Spending Forecast in February 2011. Click here for the full report.

Alaska Population Grows 13.3% in the Past Decade

According to the 2010 Census data Alaska’s population increased 13.3% over the last decade to a current estimate of 710,231 people. Nevada was the fastest growing state over the decade at 35.5%. Michigan was the only state to decline over the decade at 0.6% loss of population. Alaska by far has the lowest population density in the nation at 0.2 people per square mile compared to the national average of 42.6, more than 200 times more dense.

Alaska’s population has been growing between 1% and 1.5% each year on average. Anchorage and Fairbanks have grown slightly faster than the rest of the state. The Mat-Su region is growing at over 4% a year on average and now accounts for 12% of the entire state population.

The State Department of Labor’s predictions for growth go out until 2034. Over that period they predict Alaska will grow to 862,750 people with the Anchorage/Mat-Su region adding 38%, while the Southeast declines 14%. The most significant change will be in the over 65 age group nearly doubling from 7.5% of the population to 14.5%. Life expectancies are predicted to increase from 75 years to 80 for Alaskan men and 80 to 84 years old for Alaskan women.

Video Clip: Scott Goldsmith on Cook Inlet Gas Production and Spending

Economist Scott Goldsmith from the Institute for Social and Economic Research discusses expected Cook Inlet gas production and spending in 2011 as part of the Associated General Contractors annual Alaska Construction Spending Forecast. Click here for the full report.

Australian Company Cook Inlet Gas Find Encouraging

Linc Energy, an Australian company, has completed tests on its natural gas finds in Cook Inlet and found that the samples contain "pure, dry natural gas" that can be delivered directly to market without treatment or conditioning. The company's press release notes that the gas is located 1.5 miles from a pipeline that can carry gas to Southcentral markets. Linc will conduct flow tests on the well as soon as weather conditions allow.

Marks: Large Pipeline Returns More to Alaska

In a report released February 2 commissioned by the Office of the Federal Coordinator, Roger Marks examines the economics of a large scale natural gas pipeline to the Lower 48 compared to a state-subsidized in-state gasline.

Tax and royalty revenues would be much higher with the large line to the Lower 48, because the mainline would carry much larger volumes of gas at lower prices. The report shows that a $2 wellhead price for gas (or $7 sales price in the Lower 48), the annual public revenues would be $326 million for an in-state line and $2.3 billion for a mainline. If prices are higher, say a $5 wellhead price, the mainline would generate ten times the public revenue of an in-state line, because the production tax for in-state gas is currently fixed at a specific amount regardless of price.

The price of gas to Southcentral consumers would also be less with a mainline than an in-state line, because the gas would travel half the distance to Southcentral on the mainline with its significant economies of scale. Costs to Fairbanks would be even lower, because the gas would come directly from the mainline without requiring construction of a spur line.

Finally, the much larger volumes of gas that can be shipped on the mainline should spur additional North Slope exploration for both gas and oil. Read the full report here.