‘Perfect storm’: As gas prices plummet, New Mexico loses millions in oil revenue

LAS CRUCES, New Mexico -- As New Mexico loses millions of dollars in funding, local leaders are questioning how and why the state grew so reliant on oil revenue.

Forty percent of the current state budget relies on oil and gas revenue from the Permian Basin, lobbyist Larry Horan told the Las Cruces City Council in a presentation on Monday.

"We rely significantly and too much on extractive industries that ultimately end up hurting us," said Councilwoman Johana Bencomo, who represents district four. "In the middle of a pandemic, it's a perfect storm."

For every one dollar a barrel the price of crude oil drops, New Mexico loses $22 million, Horan said.

In January, the cost of crude oil was about $60 a barrel, according to Business Insider. On Monday, the cost was about $22 a barrel.

"We talk about the boom and bust cycle of oil and gas quite frequently," said Councilman Gabe Vasquez, who represents district three. "With the market crashing, this tells me how much we really need to be thinking about diversifying our state economy in the years to come."

In the short term, Governor Michelle Lujan Grisham vetoed $109 million in capital outlay funds and vetoed SB 232, which would have provided $50 million in much needed road improvement projects across the state.

"We do not yet know the degree to which COVID-19 and declining oil prices will impact our State's economy," wrote the governor in early March. "Given this uncertainty, I bear a heightened obligation to ensure that all significant expenditures constitute a demonstrably sound investment in New Mexico."

New Mexico has $1.7 billion in reserves, Horan told councilors. The state also has a $1.3 billion 'rainy day fund.'

"There's not a lot of concern about the current fiscal year," Horan said. "But we need to look to fiscal year 21 and also into fiscal year 22. It's a pretty grim picture for the state budget."