PHOENIX - Most of the oil-producing states have gone into recession, according to S&P Global Ratings.
The Tuesday report from primary analyst Gabriel Petek said that energy producing states reliant on oil industry-related revenues account for five of the 11 states on which S&P maintains negative rating outlooks. And while oil prices have about doubled from their low point in early 2016, the report said S&P believes that a corresponding increase in shale production looks to cap oil price growth.
The report featured a look at eight states: Alaska, Montana, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, and Wyoming. The significant pullback on oil exploration and production has been brutal for these states, S&P said.
"Of the eight states in our survey, the GDP growth rates of all but two (Montana and Texas) will rank among the 10 weakest in the nation," wrote Petek. "North Dakota's economy has suffered the largest declines, going from having the fastest growing economy in the U.S. in 2014 to the state with the most pronounced contraction in 2015 and (likely) 2016. Even Texas' economy, which is partly shielded by its relatively greater diversity, will fall to 36th from second-fastest growing in the nation."
The immediate challenge for each state relies on a number of factors, S&P said, including how reliant the state has been on oil revenues. Alaska is by far the most reliant, with oil revenues accounting for a whopping 67% of operating revenues: a much higher chunk than second-place Wyoming at 23%. Alaska's governor is pushing a comprehensive economic reform package, but lawmakers have been lukewarm on it so far.
S&P believes that the majority of the oil states will have experienced an economic contraction in 2016, once all those numbers are in.