War poses double-edged sword to state economy

<br>TULSA, Okla. (AP) _ War with Iraq would hurt Oklahoma's travel industry but could boost the state's oil and military sectors, economists say. <br><br>The net effect of an American war on Iraq,

Friday, February 14th 2003, 12:00 am

By: News On 6

TULSA, Okla. (AP) _ War with Iraq would hurt Oklahoma's travel industry but could boost the state's oil and military sectors, economists say.

The net effect of an American war on Iraq, however, likely would be negative, said Craig Knutson, president of E-conographic Consulting Services of Oklahoma.

``You have to redeploy capital for purposes of war,'' he said. ``It's not a good investment to make.''

Some Oklahoma companies would benefit if oil prices spike at the onset of the war like they did during the Gulf War. Prices reached more than $40 a barrel in 1991 before dropping.

The higher oil prices won't necessarily bolster Oklahoma's economy significantly because energy makes up a smaller part of the state's economy than 12 years ago, said Dan Rickman an Oklahoma State University economist.

And the higher oil prices could hurt travel, which would be bad for the airline industry.

AMR Corp., parent of American Airlines which employs about 10,000 people in Tulsa, posted an industry-record $3.5 billion loss last year.

Some analysts speculate the company is at risk of becoming the next major air carrier to file for bankruptcy. The company is trying to reduce expenses by $4 billion a year.

``We already know that American Airlines is in pretty serious trouble,'' Knutson said. ``You can't lose the money they are losing daily and stay afloat.''

Bob Ball, economist and research manager for the Tulsa Metro Chamber, said a war with Iraq also could hurt other travel-related industries such as reservation companies and car rental companies like Tulsa-based Dollar Thrifty Automotive Group Inc..

``If war begins,'' he said, ``then I think we've got to look for some continued low level of activity, continued declines or at least no growth at all.''

Federal spending on the war effort could be a benefit for Oklahoma because of its military bases, including Vance Air Force Base in Enid, Tinker Air Force Base in Midwest City, Altus Air Force Base and Fort Sill near Lawton.

Tinker alone is responsible for about 50,000 jobs in the Oklahoma City area, said Robert Dauffenbach, director of economic and management research at the University of Oklahoma Price College of Business.

Rickman, however, questions how positive the impact of war would be on the McAlester Army Ammunition Plant, which builds bombs. Most of the plant's production for a war with Iraq probably already has taken place, he said.