Shale oil turned North Dakota from one of the poorest US states into the second most prosperous state in a decade

The chart above shows North Dakota’s annual oil production in millions of barrels vs. its annual ranking for per-capita real GDP among US states from 1997 to 2014 and helps capture graphically the importance of shale oil to the Peace Garden State’s amazing economic turnaround over the last decade. Consider the following:

1. In 2000, North Dakota was the 8th least economically prosperous US states, ranking No. 43 in the country for per-capita real GDP that year (see red line in chart above, BEA data here), with GDP per person ($35,203 in 2009 dollars) that was more than 21% below the national average ($44,745). In that year, North Dakota was a relatively minor oil-producing state, ranking ninth among the US states for oil production with fewer than 33 million barrels of annual production (see blue bars in chart, data here) and output that represented only 1.5% of total US oil output.
2. Even as recently as 2007, North Dakota was still close to being the poorest one-third of US states, ranking No. 32 for per capita real GDP, with economic output per resident ($44,212 in 2009 dollars) that was more than 10% below the national average that year of $49,155. The Peace Garden State was still a relatively minor oil-producing state in 2007, ranking No. 8 among the states in oil output and producing a little more than 2.4% of the US total that year.
3. Starting around 2007, private oil drillers started successfully drilling for shale oil in North Dakota, thanks to advances in drilling and extraction technologies that allowed “petropreneurs” to finally tap into oceans of previously inaccessible unconventional oil in the Bakken oil fields in the western part of the state. Between 2007 and 2010, oil production in North Dakota more than doubled, and the state surpassed Wyoming, New Mexico, Oklahoma and Louisiana during that period to become America’s fourth largest oil-producing state by 2010. The state’s shale oil boom boosted the state’s per-capita real GDP above the national average in 2009 for the first time since the 1970s. In just the three years between 2007 and 2010, North Dakota moved up 20 places in state rankings for per-capita real GDP, from No. 32 in 2007 to No. 12 in 2010.
4. After more than doubling from 2007 to 2010, annual oil production in the Peace Garden State more than doubled again in the two-year period from 2010 to 2012 (from 113 million to 243 million barrels), and the state was producing more than 10% of all US crude oil by 2012. North Dakota was producing so much shale oil in the Bakken, that it surpassed both Alaska and California to become the nation’s second-largest oil-producing state in 2012, behind only Texas. Also by 2012, the energy-driven stimulus to the state’s economy moved North Dakota to the No. 2 spot in the country for per-capita real GDP at $64,150 behind only Alaska at $70,437, and 33% above the national average of $48,264.
5. In 2013, North Dakota’s real GDP per capita fell by 2%, and its ranking fell to No. 4 among US states for real GDP per capita at $62,750. But last year, North Dakota led the country with the largest increase in real state GDP (6.3%), and the state’s real GDP per capita rebounded to $65,225 setting a new state record, and moved the Peace Garden State back up to the No. 2 ranking among the country’s states for per-capita output, just behind No.1 Alaska at $66,160.

MP: For North Dakota to rise from being America’s 8th least economically prosperous state in 2000 by per capita GDP to become the nation’s 2nd most economically prosperous state in a little more than a decade (in 2012 and again in 2014), has to be one of the most impressive economic success stories in recent US history, and maybe in a generation or more.

And the main ingredient in North Dakota’s amazing economic success story? Shale oil, which set off an energy boom in the US that was unimaginable just a decade ago. Well, at least it was “unimaginable” by politicians and bureaucrats in the nation’s capital who set energy policy and try to pick winners and losers, and use taxpayer money to subsidize politically favored energy sources. And it was also “unimaginable” to many of the big oil companies who had given up on finding new gas and oil sources in America, especially in shale rock formations. But thankfully, the shale boom was very imaginable a decade ago to a small fringe group of “industry outsiders” and “petropreneurs” like Harold Hamm, whose grit and determination set off an energy revolution that helped turn one of America’s poorest states into an “economic miracle state.” North Dakota’s status as the US state with the second highest level of economic output per person for two of the last three years is just one more of many important energy-based milestones for the Peace Garden State.

Carpe oleum.

 

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