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OVERVIEW The total value of construction spending “on the street” in Alaska in 2015 will be $8.5 billion, down 3% from 2014.1,2,3 Wage and salary employment in the construction industry, which increased an estimated 6 percent last year, to about 17,600, will decline slightly in 2015.4 Oil and gas sector spending will fall 2% to $3.8 billion from its record level of $3.9 billion last year. Other spending will be $4.7 billion, a decline from $4.9 billion last year. Private spending, excluding oil and gas, will be about $1.7 billion, down from $2.0 billion last year—while public spending will increase from $2.9 to $3.0 billion. Construction spending in Alaska in 2015 is expected to be strong in spite of the drop in the price of oil from more than $100 per barrel in the summer of 2014 to between $45 and $50 today. However, the longer the price stays low, the greater the risk that some projects will be cancelled or postponed. It is impossible to predict what will happen to the oil price, because world supply has outstripped demand. The price will stabilize, and perhaps begin to increase, only when the low price stimulates more demand and eliminates high cost production, a process that could take more than a year. A further complication is the unpredictability of the role of OPEC in determining oil supply. In particular Saudi Arabia, the largest producer, could decide to restrict supply for political or strategic reasons. Because of the drop in the price of oil, the state is facing a general fund budget deficit of about $3 billion for the current fiscal year (FY2015) and is projected to have a similar deficit in FY2016 (which begins July 1 of this year). However, this will not have a large negative impact on state government construction spending this year for several reasons.

Publication Date

1-1-2015

Handle

http://hdl.handle.net/11122/5021

2015 Alaska's Construction Spending Forecast

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