By SUZANNE DOWNING
As 2025 draws to a close, Alaska’s economy can best be described as cautiously optimistic, anchored by a long-awaited revival in North Slope oil activity, but still weighed down by structural state budget challenges that have defined the past decade.
Recovery arrived in fits and starts: employment and output finally climbed back to pre-Covid recession levels, yet growth remained sluggish, oil prices have been falling, and Permanent Fund dividends smaller than many Alaskans had hoped.
The standout economic story of 2025 was the renewed momentum in oil and gas development on the North Slope, signaling what could become the first meaningful production rebound in a generation.
The Pikka Phase 1 project, jointly owned by Santos and Repsol, advanced ahead of schedule during the year. First oil is now expected in the first quarter of 2026, with peak production of roughly 80,000 barrels per day by mid-2026, which will be nearly 20% of Alaska’s total crude oil output in 2025 terms.
At the same time, ConocoPhillips continued ramping up production from its Nuna project, which began producing in late 2024. By August 2025, Nuna was producing about 7,000 barrels per day, with a projected peak of around 20,000 barrels per day. While modest on its own, Nuna helped offset declines from aging fields and provided a tangible example of new-generation North Slope productivity.
Together, these projects prompted the US Energy Information Administration to revise its outlook upward. The agency now forecasts Alaska crude oil production will average about 477,000 barrels per day in 2026, a 13% increase, or roughly 55,000 barrels per day, representing the largest annual jump since the 1980s and the first sustained growth since 2017.
Notably, the new wells are outperforming most of the existing North Slope inventory. Based on Alaska Oil and Gas Conservation Commission data cited by EIA, recent wells are averaging about 480 barrels of oil equivalent per day, compared to fewer than 400 BOE/d for nearly four-fifths of Alaska wells in 2023. Those performance gains helped justify faster development schedules and improved economic forecasts for Anchorage and the state as a whole.
Looking further out, development work also continued on the massive Willow project, though first oil remains projected closer to 2029.
Beyond oil, 2025 marked an another milestone: Alaska reached record-high seasonally adjusted employment in March. Both real GDP and total jobs returned to levels last seen before the oil-price collapse that triggered the 2015 mini-recession.
Growth was uneven, however. Health care, construction, and federally funded infrastructure projects led job gains, buoyed by broadband expansion, energy-related construction, and continued federal spending.
Private-sector momentum outside those areas remained limited, and job growth flattened later in the year as interest rates, and uncertainty about future federal budget imbalances weighed on business confidence.
For households, the most visible economic data point of the year was the Permanent Fund Dividend. The 2025 PFD was set at $1,000 per eligible resident, down sharply from $1,702 in 2024 and among the smallest dividends on an inflation-adjusted basis in the program’s history.
Paid beginning in October, the dividend reflected ongoing unwillingness of the Alaska Legislature majority to follow the statutory formula, and instead skim off money from Alaskans to pay for government.
Oil revenues, once the backbone of government funding, continued their long-term decline as a share of unrestricted general funds. In contrast, earnings from the Permanent Fund now supply the majority of general-purpose revenue.
Despite the encouraging oil outlook, Alaska’s broader economic performance in 2025 was weak by national standards. The state ranked dead last in CNBC’s 2025 “America’s Top States for Business,” citing declining oil prices earlier in the year, slow growth, and structural challenges.
From 2015 through 2025, Alaska’s GDP growth averaged just 0.4% annually, among the lowest in the country. By mid-2025, job gains had largely plateaued.
2 thoughts on “Alaska’s economic year in review: A year of mostly positive signals”
Before Alaskans get all upset over the legislature unwillingness to be the bad parent and right size government and eliminate Alaska groups like non profits out of the budget, Alaskans ought to evaluate themselves how dependent they are on government paying for every service imaginable.
That does excuse any legislator from not making the hard cuts
Just like no parent is excused from that their child can’t read nor stay employed
Taking the pfd will not solve Alaska’s budget issues
You know sometimes I without much education feel smarter than the entire legislature who all went all the way in college and they can’t even have the state life under its means
They are acting like people I know whose highest education is the 12th grade