Savings at the Pump Fuels Local Economies

As the oil industry prepares for job losses and decreased production, consumerism thrives

By Tristan Scott

Caving oil prices are bringing added savings to Montana consumers, and while the foundering market will have adverse effects on the state’s oil and gas industry, it will buoy some of Montana’s biggest economic drivers, including tourism.

Last year, tourists spent the majority of their money, almost a third, on gasoline, and the lion’s share of nonresident visitors did so during the year’s third quarter, July through September, when a gallon of regular gasoline cost $3.73.

In January, with Northwest Montana’s ski season in full swing, gas prices averaged $2.027 in the state, which is below the current national average of $2.117, according to the website gasbuddy.com, which lists prices reported by consumers.

Those prices are the lowest since 2009, when the recession drove down fuel demand and prices followed. Locally and nationwide, gas prices have fallen about 25 percent over the past month, driven largely by the collapse of oil.

If gas prices stay low, it will likely draw more tourists to Montana, economic forecasters say, and with their financial confidence bolstered by the growing economy, cheap gas will also drive up spending in other sectors as visitors and residents spend their savings on gas at local businesses, according to Barbara Wagner, chief economist with the state Department of Labor and Industry.

“With the lower gas prices you are going to see continued economic growth in most areas of the state simply because the majority of our economy is driven by consumer spending,” Wagner said. “We’re seeing record numbers of visitors at ski resorts, more people are heading to local breweries, distilleries and restaurants, and that actually results in more job growth than you think.”

Oil industry analysts say global prices will likely remain down through the summer and possibly through the end of 2015. Producers with the Organization of the Petroleum Exporting Countries (OPEC) have so far refused to cut production in light of increased U.S. shale production, including the Bakken region, which led to the recent price drop, analysts say.

But cuts to production will follow soon, with Dave Galt, executive director of the Montana Petroleum Association, predicting a 50 percent drop in production.

Wagner said mining makes up about 6.5 percent of the state’s gross domestic product (GDP), and accounts for only about 3 percent of employment in the state. When you isolate oil and gas from the mining industry, it accounts for just 1.7 percent of the state’s GDP and 1.36 percent of employment, she said.

Meanwhile, the state’s largest employer, health care, represents about 15 percent of the state’s economy, and financial services accounts for 14 percent.

“You have to remember that the oil and gas industry and the number of jobs it has added in the Bakken is much less of an economic contributor than other industries in the state,” Wagner said.

According to the latest projection from the University of Montana’s Institute for Tourism and Recreation Research, total nonresident visitor spending came in at more than $3.98 billion in Montana, supporting some 39,000 jobs.

ITRR Director Norma Nickerson said the $3.98 billion in local spending directly supports $3.26 billion of economic activity in the state, and supports an additional $1.86 billion of economic activity indirectly. The projected total contribution of nonresident spending to Montana’s economy was $5.11 billion in 2014.

According to the report, gasoline and diesel accounted for 32 percent of nonresident traveler expenditures, while restaurants and bars culled 18 percent of expenditures, retail sales took 17 percent, hotels realized 9 percent, and 9 percent went to groceries.

Nickerson says lower gas prices and increased consumer confidence point to an even stronger year for tourism spending in Montana in 2015.


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