MISSOULA – Montana has witnessed something of an economic miracle in the eastern third of the state because of the boom in the Bakken, with rural areas surpassing growth in urban areas over the past five years, according to a University of Montana economist.
The sudden decline in crude oil prices may bring growth rates into closer balance, said Patrick Barkey, director of UM’s Bureau of Business and Economic Research.
Barkey and Paul Polzin, BBER director emeritus, will present the outlook for the national, state and local economies at the bureau’s 40th Annual Economic Outlook Seminar being held in nine cities throughout Montana.
The seminar lands in Sidney on Tuesday, March 17, at the USDA Agricultural Research Station. The Miles City seminar will be held on Wednesday, March 18, at the Bureau of Land Management. Each seminar runs from 8 a.m. to 1 p.m. and includes lunch. Call 406-243-5113 or visit BBER online at http://www.bber.umt.edu to register.
“The plummeting of worldwide crude oil prices since mid-2014 has introduced more uncertainty into the current Richland County economy,” Polzin said. “Prior to the oil boom, Richland County had enjoyed a relatively stable and prosperous economy based on agriculture, food processing and a utility company.”
The oil boom has led to some significant changes in certain sectors of the local economy. Employment and average wages have risen much faster than expected in local industries usually unassociated with oil drilling and extraction. Specifically, the professional services and accommodation segments have outpaced growth in employment and wages-per-worker categories when compared to state averages.
The outlook going forward for 2016-18 suggests very slow growth rather than declines. Polzin notes, “Of course, this depends on worldwide events during the next six months to a year.”
“What was once a regional center for state and federal agencies and businesses serving area farms and ranches has evolved into a trade and finance center and, most recently, home to firms serving the Bakken oil fields,” Polzin said. “Miles City has evolved into a trade and health care center, with merchants and professionals serving people from throughout eastern Montana as well as eliminating trips to Billings or elsewhere to obtain goods and services traditionally unavailable locally.”
Most recently, the Custer County economy has been the indirect beneficiary of the Bakken oil boom. Firms serving the oil and gas industry have established themselves in Custer County. In fact, the energy services industry has become the largest component of Custer County’s economic base.
“The current plummeting of oil prices reverberates throughout the energy industry,” Polzin explained. “Thus, forecasting a relatively small economy like Custer County’s is fraught with uncertainty because the forecast not only depends on worldwide trends but also the specific actions of one or two local firms.” Applying BBER’s forecasting model yields growth in the two to three percent range from 2015 to 2018. Polzin said, “These figures could be too high if extremely low oil prices persist for a long period.”
This year’s seminar, “The New American Energy Revolution: Reshaping Montana,” will focus on the changing energy sector and feature keynote speaker Bill Whitsitt, a retired executive vice president at Devon Energy.
This is the 40th year BBER will travel around the state to deliver half-day seminars. In addition to economic forecasts, Barkey, Polzin and other economists from the Montana University System will examine the prospects for the state’s major industries.
BBER is the pre-eminent collector of primary data for the business, economic and social science sectors and specializes in local economic analysis. The UM BBER has provided information about Montana’s state and local economies for more than 50 years. For more information visit http://www.bber.umt.edu.