Times may be tough now, but Northrim Bank officials and economists say the sky is not falling — investments in oil will pay off.
Northrim President and CEO Joe Beedle, Senior Vice President Mark Edwards and Economic Consultant Bill Conerly presented at an educational luncheon last Friday, but visited the Empire first to talk about Alaska’s economic future.
Their take on Alaska’s budget deficit? Alaska should trim its budget by about a billion dollars, but the current deficit is a product of unusually low oil prices and won’t last.
Though better times are predicted, the break-even point for the state’s budget without that recommended billion in cuts is $117 per barrel, which they believe is unrealistic.
Not everyone is happy with the current tax regime and $700 million in tax credits the state expects to pay next fiscal year, but Beedle would encourage Alaskans to look to the future.
“We argue that the tax credits will serve us well,” he said.
“Mega-wells” like Point Thompson are 30-year investments, he added.
Predictions for oil production over the next couple years are expected to be about 550,000 barrels, Edwards said, with price as a driver.
It’s harder to predict past that point, he added, but most predictions show a decline after 2017.
“Clearly we have a massive amount of oil in ANWR,” Edwards said — and offshore and at Cook Inlet — “It’s not a question of ‘Is there more oil?’ but a question of access to resources.”
Though oil isn’t directly responsible for many jobs in Juneau, as the main source of revenue for the state it still has a substantial impact on the local economy.
With Juneau looking at potentially losing hundreds of jobs in the public sector, the Empire asked what might soften the blow or make up those lost jobs?
Though Northrim is supportive of small business and entrepreneurs, and Edwards acknowledged recent growth to local Coast Guard presence, Beedle took a more blunt approach.
“You cannot replace 500 jobs without a major mine,” he said.
Jobs lost to capital creep are likely not reversible, and though there is growth in retail, tourism, healthcare and other industries, plus hopes of a renewed timber industry in about 10 years, it would take something bigger to make up for the loss of hundreds of state jobs.
But remember, the sky isn’t falling.
Beedle argued that when Sitka lost its pulp mill, by far the city’s largest employer, Sitka adapted. He said Sitkans today would argue they are a very healthy community.
“It’s not the end of the world as we know it. It’s a change and if we’re prepared for it — and we’re way better prepared than in the ’80s — we won’t feel it as abruptly,” Beedle said. “Even if the government is not cutting as much as they said, this is our opportunity to step up in terms of engagement, to help people plan.”
Conerly suggests businesses have contingency plans for stronger or weaker economic environments. Families can do this too. The biggest thing to look at is cash flow and an entity’s capacity to absorb shocks to the market, so even when times are tough, businesses and families can weather through it and bounce back.