America 250: Energy states: Oil and natural gas help shape regional economies
Throughout American history, access to natural resources has helped determine which states and cities gained economic advantages, and few resources have been as transformative as oil and natural gas.
One of the earliest examples emerged in Pennsylvania in 1859, where an oil well drilled in Titusville sparked the nation’s first oil boom.
“Not every oil and gas discovery leads to a big boom, but some of them certainly do,” said Daniel Raimi, a fellow at the nonprofit research institution Resources for the Future.
“The early one in Pennsylvania led to this enormous rush of people coming into the region.”
That basic pattern in Pennsylvania — a discovery followed by rapid development — would repeat itself across the country.
Turning discoveries into growth
Texas is perhaps the clearest and most lasting example of how oil can fuel long-term economic advantages.
When an oil field was discovered at a site known as Spindletop in 1901, it helped turn Texas from a largely agricultural state into a global energy powerhouse.
Texas used its oil and gas wealth to branch out, building strong finance, manufacturing and technology sectors.
“Many of the communities in Texas that produce a lot of oil and gas — their economies are quite strong today because of the health of the industry,” said Raimi. “There are some communities that are doing very well because of their oil and gas resources, but there are others where the industry has risen and fallen over time.”
Oklahoma and Louisiana followed similar paths, with oil and natural gas development driving job creation and boosting state revenue.
More recently, advances in drilling techniques reshaped states like North Dakota and Pennsylvania by opening up oil and gas reserves that had previously been inaccessible.
“The oil and gas industry is very cyclical. It goes up and down with global energy markets,” Raimi said.
“If a community can attract other industries to complement the oil and gas industry, that is what you really need to sustain a healthy long-term economy.”
Banking for the future
Alaska offers a unique example of how oil wealth can translate directly into public benefits.
After oil was discovered in the far north portion of Alaska in 1968, the state created the Alaska Permanent Fund to manage its oil wealth and share it across generations.
The fund operates as a sovereign wealth fund, with a portion of oil revenue set aside each year and invested across a diversified portfolio.
Those investments generate returns that allow the fund to grow over time.
The fund is now worth more than $80 billion.
It allows Alaska residents to receive an annual check — essentially a dividend for living in a resource-rich state.
“The single most important thing that a state government can do is take some of the government revenue that’s generated by the industry and invest those dollars into long-term, permanent funds that can help stabilize the public finances and the economies of producing regions,” said Raimi. “Saving money for the future and trying to diversify local economies is really the way to go.”