Rangely, a small town in northwest Colorado, is notable for its economic stability, with a low cost of living and a median household income exceeding $70,000. The town has a strong connection to outdoor activities, such as off-roading in the nearby mountains, a popular pastime for residents. However, Rangely’s economy is heavily reliant on the oil and gas sector, which accounts for over half of the county’s economic output. This dependency stems from the oil boom during World War II, which played a significant role in the town’s development.
But Rangely faces an existential threat. An oil boom during World War II led to the town’s location. More than half of the county’s current economic production comes from the oil and gas sector. In the United States, the world’s largest producer of natural gas and oil, Rangely is not alone. Many communities nationwide rely on the conventional energy sector for well-paying jobs and public funds for essential services like schools.
It’s dangerous to rely too much on any one industry, and there are often booms and busts in the oil sector. However, the use of natural gas and oil fuels climate change, which poses a particular threat to the economics of towns depending on these resources. Any effective plan to stop global warming must include measures that will gradually drastically lower the demand for all fossil fuels.
The global agreement in 2023 to “transition away from fossil fuels” and the increasing popularity of electric vehicles, which are beginning to replace gasoline, and diesel-powered automobiles, trucks, and buses, are two early indicators of this shift.
During the Barack Obama and early Joe Biden administrations, the White House tried to develop comprehensive plans to lower greenhouse gas emissions and assist low-income neighbourhoods. However, they lacked a strategy to get oil and gas communities like Rangely ready for upcoming economic difficulties.
Why do oil and gas towns get ignored?
In recent legislation, Congress has given top priority to helping small communities. Nonetheless, there were three main reasons why towns that relied heavily on gas and oil were mostly left out of these plans.
First, there seems to be less urgency. Communities that depend on coal have received disproportionately more attention when it comes to a “fair transition” as the country moves away from fossil fuels. After 15 years of reduction in American coal production, a sustained move away from coal seems both inevitable and imminent.
On the other hand, the United States is still producing more natural gas and oil. Certain oil and gas communities are undoubtedly having difficulties already. However, moving away from oil and gas may seem like an issue for decades to come due to the vast economic concerns involved.
The majority of Republicans, including many local officials in towns that depend heavily on oil and gas, have no plans whatsoever for a future drop in the output of these resources. The majority of Democratic legislators would rather emphasise how addressing climate change might spur future economic expansion.
“When I think about climate change, I think jobs,” is a quote that Biden frequently uses.
His emphasis on the financial benefits of climate solutions is valid. However, there is rarely a direct substitute for the well-paying positions in the oil and gas sector and the tax income those businesses generate for local communities. This is especially true of renewable energy jobs.
Third, the policy instruments available to economists are ill-adapted to the problems that the oil and gas industries face. Strategies for promoting local economic development typically centre on helping persistently struggling local economies by implementing policies like wage subsidies, which can quickly increase employment rates.
Communities dependent on oil and gas, which are not often facing hardships at the moment, require a distinct treatment plan. The 15 years leading up to the COVID pandemic saw average annual GDP growth in US counties producing oil and gas of 2.4%, while the national average was 1.9%.
Most oil and gas communities can get by without urgent economic stimulus plans. They require comprehensive approaches to economic growth that can foster new sectors while leveraging their current advantages to ensure their continued prosperity.
Ways to assist towns in becoming ready
Harvard economist Ricardo Hausmann likens the difficulty of creating new economic capacities to the game of Scrabble, in which the appearance of a new letter allows for the formation of a larger word. He uses the economy of Finland as an example. From gathering lumber to creating wood-cutting instruments to creating automated cutting machines, it changed with time. From there, it developed into highly automated devices, some of which are employed by multinational companies like the enormous telecom company Nokia.
These economic developments need to be customised to the unique qualities of each location. However, identifying the issue and making an investment in remedies is the first step.
Southwest Colorado is home to the Southern Ute Indian Tribe. It allocates oil and gas income to two funds: a “Growth Fund” that invests in a variety of businesses to diversify the tribe’s revenue streams and a “Permanent Fund” that ensures the tribe’s assets are in line with its long-term financial goals, thereby promoting fiscal sustainability.
To assist areas facing serious economic risks, such as a potential decrease in oil and gas prices, a recent nationwide Academies panel recommended the establishment of a federally chartered organisation on a nationwide scale. This company might finance programmes that provide access to employment opportunities, vital public infrastructure, and displaced people.
The state Office of Just Transition in Colorado has begun to carry out this function. At the moment, its exclusive focus is on moving away from coal, to assist workers in finding new employment possibilities and communities in creating new economic opportunities. However, its purpose can grow in the future. In fact, because of the neighbouring coal shutdown, Rangely is already getting some support.
No concrete answer
Rangely provides an example of how regions dependent on oil and gas will require specific strategies based on the advantages and disadvantages of their particular locations. There’s no pre-made playbook available.
To guarantee that policymakers know the necessary to assist communities that rely heavily on fossil fuels in successfully navigating the energy transition, universities, research institutes, and charitable organisations launched the Resilient Energy Economies initiative.
Preparing an economy for resilience is best done ahead of a catastrophe. The narrative of Joseph, whose visions predicted seven years of plenty for Egypt followed by seven years of famine, is well-known to everyone who has read the Bible or seen Broadway. Following Joseph’s vision, the pharaoh used the boom to get ready for the bust.
Today, the United States is producing a lot of gas and oil. Lawmakers are aware that risks will arise. However, the nation is currently failing to get communities ready for more difficult times ahead.
While currently stable due to robust oil and gas production, these communities face looming economic risks as global efforts to reduce fossil fuel dependency intensify. The urgency to prepare for this shift is often overlooked because the immediate economic pressures are not yet fully felt.
However, the economic foundations of these towns will face growing challenges as a result of the unavoidable decline in fossil fuel use, which is a result of climate change mitigation policies and the growth of renewable energy.
Transitioning these economies requires tailored strategies that leverage their existing strengths while fostering new industries, much like the evolution of the Finnish economy from lumber to advanced technologies.
The creation of federal and state-level initiatives, such as Colorado’s “Office of Just Transition” and the proposed federally chartered corporation, can provide support for displaced workers and critical infrastructure, helping these towns diversify their economic base.
However, there is no one-size-fits-all solution. The approach needs to be as varied as the regions themselves, and proactive investment in education, innovation, and local industries will be key to ensuring their long-term resilience.
As the energy transition accelerates, the time to prepare for a post-oil economy is now, ensuring that communities like Rangely can thrive in the future, regardless of the fate of the oil and gas industry. This foresight is critical for avoiding economic hardship and securing a sustainable and diversified future for such towns.