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Economic Outlook 2012 - Looking Forward in 2012

When it comes to the economy, the path to recovery points toward Oklahoma's booming energy sector.
Economic Outlook 2012 - Looking Forward in 2012

Oil and gas industry

Show Dates

Show 1202: Economic Outlook 2012 - Looking Forward in 2012

Air date: January 8, 2012

 

Transcript

ROB MCCLENDON:  WELL WHEN IT COMES TO OUR ECONOMY, WE MAY NOT BE OUT OF THE WOODS YET, BUT THE PATH TO RECOVERY IS CERTAINLY POINTING TOWARDS OKLAHOMA’S BOOMING ENERGY SECTOR.  THAT WAS THE CONCLUSION OF SEVERAL ECONOMISTS GATHERED AT THE OKLAHOMA ECONOMIC OUTLOOK CONFERENCE.  AND OUR COURTENAY DEHOFF WAS THERE AND JOINS ME NOW HERE IN THE STUDIO.

COURTENAY DEHOFF:  WELL ROB BY NEARLY ALL ACCOUNTS, OKLAHOMA’S INCREASINGLY ROBUST ECONOMY SHOULD CONTINUE TO GROW THIS YEAR, THANKS IN GREAT PART TO THE STRENGTHS OF OUR OIL AND GAS SECTOR.

OKLAHOMA’S ECONOMY IS LOOKING UP.

KEN MILLER:  WELL WE’RE CERTAINLY HEADED IN THE RIGHT DIRECTION.  I DON’T THINK WE ARE WHERE WE WANT TO BE.  WE ARE NOT BACK TO PRE-RECESSION LEVELS.  BUT REVENUES ARE COMING IN WELL WHETHER IT IS INCOME, SALES, GROSS PRODUCTION.  MOST OF OUR REVENUES ARE UP AND THEY ARE UP IN A PRETTY SIGNIFICANT WAY.

COURTENAY:  STATE TREASURER KEN MILLER SAYS IT CAN ALL BE ATTRIBUTED TO ONE THING.

KEN MILLER:  WE HAVE ABOUT A 150 BILLION DOLLAR ECONOMY IN THE STATE OF OKLAHOMA AND WE CAN TIE ABOUT 50 BILLION OF THAT BACK TO THE OIL AND GAS INDUSTRY.  SO IT’S A HUGE DRIVER.

COURTENAY:  WHICH IS CERTAINLY GOOD NEWS FOR OKLAHOMA’S ECONOMY.

CHAD WILKERSON:  IT’S VITAL IN OKLAHOMA.  THE SECTOR NOW ACCOUNTS FOR ALMOST AS LARGE A SHARE OF GDP AND PERSONAL INCOME AS IT DID IN THE LATE SEVENTIES, EARLY EIGHTIES, WHICH AS LONG AS PRICES STAY HIGH THAT IS AN OUTSTANDING THING.

DAN RICKMAN:  ENERGY IS THE ONE THAT TENDS TO DISTINGUISH OKLAHOMA FROM THE AVERAGE ACROSS THE NATION.  IN MANY RESPECTS WE FOLLOW THE NATION IN MANY MANUFACTURING TRENDS AND OTHER TRENDS, BUT IT IS ENERGY THAT OFTEN GIVES US THAT DIVERGENCE FROM THE REST OF THE COUNTRY.

COURTENAY:  CHAD WILKERSON WITH THE FERDERAL RESERVE BANK, AND OKLAHOMA STATE ECONOMICS PROFESSOR DAN RICKMAN WERE PART OF THE 2012 OKLAHOMA ECONOMIC OULOOK CONFRENCE IN OKLAHOMA CITY AND SAY WHILE STATE REVENUES FROM OIL AND GAS ARE PROJECTED TO LEVEL OFF IN 2012, A REBOUND IN THE GLOBAL ECONOMY COULD PUSH PRICES EVEN HIGHER IN 2013.

CHAD WILKERSON:  THE ONLY STATE I THINK YOU COULD SAY THAT’S IN BETTER SHAPE THAN OKLAHOMA RIGHT NOW WOULD BE NORTH DAKOTA, WHICH HAS JUST SEEN A HUGE BOOM IN OIL AND GAS ACTIVITY, BUT OTHER THAN THAT OKLAHOMA IS UP PRETTY HIGH.

COURTENAY:  BUT SUCH HIGHS DO RUN A RISK.  HIGH OIL PRICES COMBINED WITH HIGH AGRICULTURE PRICESDROVE RURAL LAND VALUES UP BY 25 PERCENT LAST YEAR.  AND WHILE OIL PRICES REMAIN STRONG, COMMODITY PRICES HAVE BEGUN TO WEAKEN; KIM ANDERSON WITH OKLAHOMA STATE UINVERSITY.

KIM ANDERSON:  THE UNITED NATIONS REPORTED THAT FOOD PRICES HAVE COME DOWN EVERY MONTH FOR THE LAST FIVE MONTHS.  YOU LOOK AT THE MAJOR COMMODITY PRICES IN THE UNITED STATES: CATTLE, CORN, WHEAT, SOYBEANS.  THOSE PRICES HAVE DECLINED SINCE JANUARY OF 2011.  THE ECONOMIC IMPACT OF THE LOWER FARM PRICES WILL HAVE A NEGATIVE IMPACT ON FARM INCOME WHICH WILL HAVE A NEGATIVE IMPACT ON THE ECONOMY.

COURTENAY:  WHICH COULD BURST OKLAHOMA’S RISING LAND BUBBLE.

CHAD WILKERSON:  AND THAT IS PROBABLY TOP ON THE RADAR SCREEN OF RISKS TO OUR REGION, YOU KNOW THAT AREN’T RELATED TO NATIONAL RISKS.  COMMODITY PRICES HAVE INCREASED A LOT, FARM INCOMES HAVE BEEN STRONG WITH THE DEGREE TO WHICH PRICES HAVE INCREASED, I THINK HAS US A BIT WORRIED.  YOU KNOW WHAT HAS US NOT AS WORRIED PERHAPS AS WE WERE ABOUT THE, YOU KNOW THE HOUSING BUBBLE A FEW YEARS AGO IS THAT MUCH LESS OF THE FARM LAND PURCHASES ARE FUNDED BY DEBT, A SIGNIFICANT AMOUNT FINANCED BY CASH OR BY OTHER EQUITY.  SO IF THERE WERE, YOU KNOW SOME COME DOWN IN PRICES IT WOULDN’T BE AS BIG OF A HIT ON EITHER THE FARMERS THEMSELVES OR ON THE BANKS THAT FINANCE THEM.

COURTENAY:  AND WHILE A HOT ENERGY DRIVEN ECONOMY DOES POSE SOME RISKS, IT’S A PROBLEM OKLAHOMA’S STATE TREASUERER SAYS HE IS WILLING TO FACE.

KEN MILLER:  IT’S REALLY THE DRIVER OF OUR ECONOMY.  WE HAVE ABOUT ONE-THIRD OF OUR ECONOMY CAN BE TIED BACK TO THE ENERGY INDUSTRY.  WHETHER IT’S NATURAL GAS OR WHETHER IT’S OIL; IT’S BIG.

COURTENAY:  BUT DESPITE CONTINUED POSITIVE REVENUE REPORTS, STATE OFFICIALS ARE PREDICTING A RELATIVELY FLAT BUDGET FOR THE COMING FISCAL YEAR BECAUSE OF THE LOSS OF ONE-TIME REVENUES THAT WERE USED TO CLOSE THIS YEAR'S BUDGET GAP OF ABOUT FIVE HUNDRED MILLION.  LAWMAKERS ALSO WILL BE WITHOUT AN ESTIMATED SEVENTY MILLION IN LOST REVENUE FROM THE STATE'S INCOME TAX, WHICH DROPS FOR THE 2012 TAX YEAR FROM FIVE POINT FIVE PERCENT TO FIVE POINT TWO FIVE PERCENT.

 

ROB:  SO IT CERTAINLY SOUNDS LIKE THERE’S GOING TO BE SOME BELT TIGHTENING IN STATE GOVERNMENT JUST BECAUSE OF THOSE REVENUE NUMBERS.  BUT I WANT TO ASK YOU ABOUT THE JOBLESSS RATE.  WE’VE SEEN A SLIGHT UPTICK IN UNEMPLOYMENT RECENTLY.

 

COURTENAY:  WE HAVE ROB.  BUT ECONOMISTS SAY THOSE NUMBERS MIGHT BE MISLEADING, NOW IT’S BECAUSE OF TWO THINGS.  THE FIRST IS PEOPLE THAT HAD JUST GIVEN UP LOOKING FOR JOBS ARE ONCE AGAIN STARTING TO GO OUT AND LOOK FOR JOBS.  AND PEOPLE ARE RELATIVELY POSITIVE QUITTING THEIR JOBS AND GOING OUT AND LOOKING FOR EVEN BETTER ONES.

 

ROB:  FINAL QUESTION TO YOU.  IS THEIR ANYTHING OUT THERE ON THE HORIZON THAT WORRIES THE ECONOMISTS THAT YOU TALKED TO?

COURTENAY:  THERE CERTAINLY IS ROB.  WHILE IT MAY SEEM LIKE A LONG WAYS AWAY, THE ECONOMIC TURMOIL IN EUROPE POSES A HUGE THREAT TO THE GOBAL ECONOMY.  WHICH IN TURN POSES A THREAT TO THE OIL SECTOR, WHICH IN TURN POSES A THREAT TO THIS STATE’S ECONOMY AND OUR RAPID RISE FROM RECESSION.

ROB:   ALRIGHT, NICE REPORT, THANK YOU COURTENAY.