Alaska’s Economic Performance Tied To Gas Prices

Our guest blogger is Michael Ettlinger, Vice President for Economic Policy at the Center for American Progress Action Fund.

Pop quiz: you’re the governor of a state that produces the most oil per-capita of any state in the union—do you want gasoline prices paid by consumers to go up, or down?

Once suspects that Governor Sarah Palin of Alaska knows the answer. No state in the nation has better economic growth when gas prices go up than Alaska, and no state has worse economic performance than when gas prices go down. Of the last 30 years, in 18 of them gas prices have gone up. Alaska’s real Gross Domestic Product grew by an average of 6% in those years — better than any other state.

In 11 of those years gas prices fell. Alaska’s average change in GDP in those years: -4.8%, which was the worst economic performance of any state during those years. The effect is amplified when the gas prices rise or fall by greater amounts. When gas prices go up by over 5%, Alaska’s state GDP increases by an average of 7.8 %. When gas prices fall by over 5%, the Alaska economy falls by 8.6%.

While the rest of the country mourns rising gas prices, it’s good news if you’re Alaska’s governor. Alaska taxes the oil it ships to out-of-state consumers and uses the money, in part, to send “dividend” checks to its citizens. Just this year, with gas prices hitting record highs, Governor Palin got to send every Alaskan $3,269. That’s one ticket to popularity.


Read the full report here.