Is California an oil-producing state?

This blog post was written by Managing Director of Housing Research, Danielle Hale, and Research Economist, Scholastica (Gay) Cororaton.

California may not be what you think of when you think US oil production, but according to statistics from the Energy Information Administration[1] on monthly crude oil production, California was the number three oil-producing state in terms of barrels of oil produced in 2014 and 2015, as seen in the first table and map below (Table 1/Map 1).

So why hasn’t the collapse of the price of oil wreaked more havoc on the California economy? It’s important to consider the contribution of oil in the context of other economic activity. If we compare the value of oil production[2] against the total value of economic production in a state, otherwise known as GDP by State[3], we can get a sense of oil’s importance to the state economy, and we can understand why Californians are not as concerned as Alaskans about the price of oil, even though California produced 22 to 25 million more barrels of oil than Alaska did in 2014 and 2015.

Looking at the second table and map below (Table 2/Map 2), we can see that as a share of economic activity, the number one oil state is North Dakota. Even though oil prices have dropped, oil production was still the equivalent of more than half of total estimated economic activity in the state in 2015[4]. Alaska follows next with an estimated oil share of economic activity at 17.5 percent in 2015. Wyoming, New Mexico, Texas, Oklahoma, and Montana round out the top 7, each expected to have oil production exceed 3 percent of 2015 state economic activity. Kansas, Colorado, Utah, Louisiana, and Mississippi are the next five states, each with oil production estimated to exceed 1 percent of state economic activity in 2015. In contrast, California, the number three producer by barrels, did not see the contribution of oil production exceed 1 percent in either year reviewed.

What industry is considered large? The mining industry across the US contributed 2.6 percent to GDP in 2014[5]. Compare that with the construction industry (3.8 percent) and the housing industry (9.6 percent) in 2014 and that gives some perspective. The collapse in the price of oil has certainly already had effects on the US production industry, and until oil prices recover, areas in which the production of oil plays a prominent role in the economy are likely to experience a headwind to growth. In other parts of the country, however, lower oil prices continue to be a welcome relief for consumers, largely offsetting the negative effects.

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[1] https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm

[2] Using total annual barrels produced and an average annual oil price

[3] GDP data by State is from the Bureau of Economic Analysis (BEA) for 2014 and estimated by National Association of REALTORS® (NAR) for 2015 based on BEA and EIA data

[4] Economic activity for 2015 was estimated from 2014 figures using information about oil production changes and the overall change in US economic activity for 2015.

[5] This includes value-added from oil and gas extraction, mining except oil and gas, and support activities for mining per the BEA Valued Added by Industry data; NAR calculations.