Effect of crude oil price on employment in Oklahoma non-energy sectors

Abstract

The energy sector is an integral part of the Oklahoma economy. Nationally, low oil prices are seen as good for the overall economy. The loss of income from domestic producers is offset with more disposable income for those not employed by the energy sector. This is a net gain for the country as a whole (Kang et al). However, in Oklahoma in 2014, the location quotient in Oklahoma for the mining sector was 7.06 when compared to national averages (BLS). This means that while a downturn in oil prices may be good for the nation as a whole, it is not beneficial for the state of Oklahoma.

This issue is important, especially in Oklahoma and other oil-dependent states, because the energy sector has been notorious for its cyclical nature. A more thorough understanding of the benefits and detriments of oil prices on local economies can help drive business and policy decisions on a local, state and national level.

This study backs up the assertion made by Kang that Oklahoma is a state that stands in contrast to the majority of the U.S. in that low oil prices have a negative impact on the local economy. While it is true that some industries, such as manufacturing and information, have had a positive reaction to low oil prices over the last 26 years, economy-wide the impact has been a negative one. In terms of policy, this paper shows the importance of a strong mining sector to Oklahoma's economy.