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The North Dakota model: A recipe for getting off Saudi oil & putting Americans to work

October 24, 2011

Why buy sharia oil from the Arabian peninsula and help fund an oppressive Saudi system that also diverts profits toward terrorism?  The only “good” answer for years has been “we have to.”

Except we don’t have to.  Slowly but surely, through consistent and persistent development of energy resources in the United States and throughout the Western hemisphere, we’ll continue tipping the balance away from Middle East oil.  IF, as economist Mark Perry suggests, we are willing to acknowledge and follow North Dakota’s blueprint.  From the American Enterprise Blog last month:

There’s no shortage of bad economics news these days. In August there were no new jobs created, retail sales were flat, consumer confidence plunged to recession-era lows, and it was reported this week that the nation’s poverty rate last year rose to the highest level since 1993. Yet, amid all of the national “gloom and doom” there is an amazing story of a booming economy in North Dakota, America’s most successful state by every economic measure. Here are some recent facts about North Dakota’s economy, which is flourishing as a direct result of the booming oil and gas production in the state’s oil-rich Bakken formation:

1. North Dakota set a new record in July for the most oil ever produced in a single month—more than 13 million total barrels at the rate of 423,600 barrels per day—an increase of almost 14 percent above the previous record in June, and a gain of almost 32 percent from July of last year (see chart below). In just a little more than two years (since June 2009), oil production in North Dakota has doubled to its current level. At the current rate of ongoing record-setting production increases, North Dakota will likely surpass California (540,000 barrels per day) and Alaska (550,000 barrels) by next year to become the number two oil-producing state in the country, behind only Texas (1.4 million barrels).

2. While the national economy struggles to add jobs in the current “jobless recovery,” jobs in North Dakota are increasing at a record-setting pace, and not just oil-related jobs. The overall state employment level reached an all-time high in July and is 10 percent above the pre-recession level in 2007. In contrast, U.S. payroll employment is still 5 percent below the December 2007 level. Oil-related employment in North Dakota has more than doubled in just two years, from 6,600 jobs in July 2009 to 15,800 jobs in July of this year (see chart below).

Energy  sector jobs & production

3. In the first quarter of 2011, North Dakota led the country with a 6.9 percent increase in personal income compared to the previous quarter. Second place Wyoming’s income growth at 2.6 percent wasn’t even close, and North Dakota’s income growth was almost four times the national average of 1.8 percent.

4. In 2010, North Dakota led the country with a 7.1 percent increase in real state GDP, almost three times the national average of 2.6 percent, and two full percentage points above the 5.1 percent economic growth for second-place New York.

5. North Dakota’s jobless rate continues to be the lowest in the country. In July, North Dakota’s 3.3 percent unemployment rate was lower than second-place Nebraska’s rate of 4.1 percent by almost a full percentage point, and was almost six percentage points below the national rate of 9.1 percent.

6. At a time when other states are facing declining revenues and budget deficits, North Dakota’s tax revenues are soaring and it currently has a $1 billion surplus. In May, the state legislature passed a bill to reduce individual income tax rates.

7. In this video about Williston, North Dakota, a city in the heart of the state’s oil-rich Bakken formation, MSNBC reports that the local Walmart has a hard time keeping up with demand and sells out of merchandise almost every day, and the local McDonald’s is one of the busiest in the country.

8. North Dakota home prices have risen consistently even through the national housing bubble and subsequent crash, and are currently at record-high levels. While the national real estate crash has brought average U.S. home prices back to 2003 levels, home prices in North Dakota have continued to appreciate every year through both the recession and financial crisis, and are now 46 percent above 2003 levels.

Bottom Line: North Dakota’s impressive economic success clearly illustrates some of the proven benefits of domestic energy production: ongoing growth in jobs, output, and income; a jobless rate close to 3 percent; a bubble-resistant housing market; and a huge state budget surplus. There’s no reason why the economic success of North Dakota can’t be duplicated elsewhere, if we would only open up more U.S. land and off-shore areas to domestic energy exploration and drilling.

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