The oil industry downturn severely affected major energy-producing US states, according to a note from the Federal Reserve Bank of Kansas City. Six states – North Dakota, Louisiana, New Mexico, Kansas, Oklahoma, and Wyoming – saw economic activity decline from September 2015 to September 2016. And while these are not the only energy-producing states in the US, the energy industry makes up a major portion of the economies of some of these states.
Wyoming, Louisiana and North Dakota saw the largest decline in economic activity in the measured period. Oklahoma, Kansas and New Mexico also saw economic declines, while all other states have seen growth.
This period corresponds to the worst part of the downturn, as oil prices dropped to $26.21 a barrel on February 11, 2016. Most states saw rig counts bottom out over this period as well, as companies paused operations in the difficult price environment. In Kansas, rig activity stopped altogether in mid-2016 and the current rig count in the state remains zero.
Wyoming was the first state in the KC Fed’s district to be affected by the downturn in oil prices, shortly followed by Oklahoma, New Mexico and Kansas. By September 2016, Wyoming was the only one of these states to have exited its recession. Overall, it appears that states with energy as a major portion of the overall economy experience recessions differently than other states. Energy-producing states enter and exit national recessions later than other states. Additionally, energy producing states experience shorter but more frequent recessions.