Published November 27 2012
Forum editorial: Oil boom’s potential to spreadHere’s an impressive barometer of the gusher of new wealth flowing from the oil boom in western North Dakota: Bank deposits more than doubled, to $3.2 billion, in nine counties at the heart of the Bakken Formation over the past five years. That’s an astonishing achievement. The increase, 128 percent, compares to a very healthy rise in deposits of 37.5 percent in Cass County over the same period. It’s one of the quantifiable measures of new affluence in an area that has known more than its share of hardscrabble times.
The influx of money is so significant, in fact, that bankers have sometimes found it difficult to find havens to invest all that money. Lending, according to an analysis by the Federal Reserve Bank of Minneapolis, has not kept up with the galloping growth in deposits. Part of that lag can be explained by the fact that many of the petroleum developers, contractors and other firms that have rushed to the Bakken maintain relationships with bankers back home. But the gap points to a very serious challenge facing North Dakota in reaping the full benefits of the nonrenewable wealth it is extracting from the earth: how best to leverage that money in ways that create a sustainable economic future by investing it productively at home.
Put another way, how can the wealth from the Oil Patch be spread around to the rest of the state? One way to gauge the spillover effect of the oil boom is to compare the growth in wages in the rest of North Dakota with the historical growth rate. Because of the well-documented labor shortage in the Oil Patch, and because of the high wages paid by oil companies and others, it’s not surprising that wage growth there outpaced the rest of the state. The 17 oil and gas counties saw average wages jump by 15.2 percent from 2010 to 2011, compared to an impressive 9.6 percent statewide.
So there are real signs that the wealth is spreading from oil fields to main streets around the state. Entrepreneurs and others are creating new outlets for investment, providing jobs and opportunities. One example is the North Dakota Housing Finance Authority’s Housing Incentive Fund, which provides tax credits for contributions that build needed affordable rental housing in communities – with planned projects in need of $4.4 million in contributions to get them off the drawing boards.
A cultural change will be an important part of North Dakota’s successful transition from nonrenewable oil wealth to robust, sustainable economic growth. Federal Reserve Bank officials noted the conservative lending attitudes of Oil Patch bankers, many of whom recalled the painful consequences of earlier booms that turned to busts. But all signs point to a sustainable boom. North Dakota must have the confidence to invest in itself to make the most of its natural resources wealth.
Forum editorials represent the opinion of Forum management and the newspaper’s Editorial Board.
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