80s Depression

The character of Alaska would change dramatically if oil revenue disappeared. The state's citizens had a taste of this when oil prices crashed in 1985-86. From a high of $40 in 1981 and a steady rate of about $27 a barrel in 1985, by 1986, the price of oil had fallen to less than $15. The impact on the state's economy and people's lives across the state was devastating. The value of the state general fund revenues fell from $4.1 billion in 1984 to $2.9 billion in 1986 and then $2.1 billion in 1988. By 1990, they had dipped to $143 million. State government officials acted quickly to cut spending, but it was not enough to prevent a crisis. The deep cuts in the state budget meant a widespread loss of jobs, reduced incomes, and loss of business and property values. Nine out of fifteen banks in the state failed. Federal banking inspectors moved from one bankruptcy to another as if they were moving through the wreckage of a natural disaster.

The state recovered from that drastic downturn. But it is a reminder today of oil's important role in Alaska's economy and the lives of all Alaskans. It is also a reminder of the need for Alaska to diversify its economy.  Since hitting its peak of 2 million barrels a day in 1988, the amount of oil Alaska produces has steadily declined to under 600,000 barrels since 2010.

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