Before the Civil War, when Louisiana was one of the most prosperous of southern states, its economy depended primarily on two then-profitable crops—cotton and sugar—and on its position as the anchor of the nation's principal north–south trade route. But the upheaval and destruction wrought by the war, combined with severe flood damage to cotton crops, falling cotton prices, and the removal of the federal bounty on sugar, left the economy stagnant through the end of the 19th century, although New Orleans retained its commercial importance as an exporter of cotton and grain.
With the addition of two major crops, rice and soybeans, the rebirth of the timber industry as a result of reforestation, the demand for pine for paper pulp, and most dramatically, the rise of the petrochemical industry, Louisiana's economy has regained much of its former vitality. Today, Louisiana ranks 2nd only to Texas in the value of its mineral products. As of 1997, the value of mineral production (including fossil fuels) was $27 billion, accounting for about 18% of the value of mineral production in the US.
Louisiana is primarily an industrial state, but its industries are to a large degree based on its natural resources, principally oil, natural gas, water, and timber. A booming oil industry fueled an expansion in the Louisiana economy during the 1970s. That expansion ended in the early 1980s, when the price of oil dropped from $37 a barrel in 1981 to $15 a barrel in 1986. Employment in oil and gas extraction dropped from 100,000 to 55,000. Energy-related industries such as barge building, machinery manufacturing, and rig/platform production also suffered. At the same time that oil prices dropped, natural gas prices rose, forcing a contraction in the chemical industry which uses large quantities of natural gas. Chemicals were also hurt by a leap in the exchange value of the dollar in the mid-1980s, as Louisiana exports 25% of its chemical production. A subsequent drop in the dollar's exchange value in the late 1980s and early 1990s enabled the chemical industry not only to rebound but to expand. A higher dollar in the late 1990s once again reversed the chemical industry's growth. In an attempt to offset losses in employment, Louisiana built several riverboat casinos and a land-based casino in 1995 which added about 7,000 jobs. Falling oil prices helped produce a mild recession in 1998 (-0.8% fall in Louisiana's gross state product), but their recovery helped produce robust growth rates of 9.3% and 16.7%. Growth fell abruptly to 2.6% in the national recession and slowdown of 2001. The oil and gas extraction sector, however, continued to grow in both absolute and relative terms. From the trough of $13.3 billion in 1998, when oil and gas output amounted to only 10.9% of gross state product, annual oil and gas output rose 109.3% to nearly $28 billion by 2001, accounting for 18.8% of gross state product. Growth in output from both financial services and general services was about 22% in the period 1997 to 2001, and growth in government output was just under 20% for this period. Output from manufacturing, by contrast, decreased 16.2% 1997 to 2001, falling from 16.8% of gross state product to 11.7%. During the national recession in 2001, employment gains continued in health services, lodging establishments, state services, and in the transportation and public utilities sector. Louisiana's employment levels slowed during the second half of 2002, the largest employment declines occurring in manufacturing, construction, transportation and public utilities, and in financial services.
Louisiana's gross state product in 2001 was 24th largest among the states at $148.7 billion, to which mining contributed $28.1 billion (99.3% from oil and gas extraction); general services, $25.0 billion; trade, $20.4 billion; financial services, $19.6 billion; both government and manufacturing, $17.4 billion; transportation and public utilities, $12.9 billion; and construction $6.5 billion. The public sector constituted 11.8% of gross state product in 2001.