An analysis conducted by the Biofuels Digest found that states that produce enough energy to meet their internal demand for gasoline had economic growth rates 2.5 times higher than the national average in the year leading up to the 2008 financial crisis. In addition, the analysis concluded that energy-producing states either completely avoided the 2008-09 economic recession or experienced a much shallower economic drop relative to other states that did not produce enough energy to cover their internal demand.

Not all states, however, fit into the trend. For example, West Virginia produced less than 40 percent of its own gasoline through in-state production, yet it maintained a growth rate above 2 percent. Analysts concluded that the production of coal-based energy was responsible for carrying the state through the recession. Meanwhile, Alaska generates nearly half of its GDP from fuel, yet it experienced a drop of 2 percent in growth during the recession.

To try to account for the states that did not fit the trend, Biofuels Digest conducted interviews of businesses, farmers, economic development leaders, bioenergy producers, local officials and researchers in Iowa, South Dakota, Minnesota, Nebraska, Tennessee and Florida. The investigation led the Digest to identify six factors that were important to the economic strength of the rural economies in the six visited states.

  • Investment retention. Communities that were able to produce non-gasoline domestic energy such as other fossil fuels like coal, bioenergy and wind counteracted the outflow of dollars spent on gasoline, so they could be reinvested in the community to foster local growth. * Diversification. Communities that diversified from agriculture into bioenergy and biotechnology were able to keep skilled workers and reduce the “brain drain” of talent out of the state. * Good neighbors make good economies. Sharing technologies and resources within a target technology turned the attraction of one key company of technology into several allied technologies that could work together and build new infrastructures. * Targeted economic revival funding. Projects like the Iowa Power Fund had strong impacts on attracting companies like POET, DuPont and Danisco into the state. * Connections. States that connected their top university research programs and technology centers of excellence to foster pilot projects and cross-training of personnel further diversified small communities, provided a key competitive advantage and stiffened resistance to the economic downturn. * Give-back to the community. Communities with strong cohesion were more committed and successful in attracting new business.

According to the Digest, a direct link existed between those communities that had suffered through the farm crisis of the 1980s and a resistance to the most recent recession. A “never again” attitude seemed to exist that led communities to build off a base in agriculture while not being limited to it. Thus, diversifying into bioenergy and other life sciences was a defense against another downturn.

To read more about the Biofuels Digest analysis and their ongoing Revival series on the economic resilience of energy producing communities, visit http://biofuelsdigest.com/bdigest/2010/10/25/how-and-why-did-energy-producing-states-skirt-the-us-recession/.

Energy-Producing States Skirt Recession

An analysis by Biofuels Digests suggests states that were able to meet or counteract their internal demand for petroleum with diversification into new alternative energy technologies were least affected by the 2007-09 economic downturn. Credit: NAFTC




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