Economic analysts are warning that New Mexico could be unable to rely on its oil and gas industry as the market continues to struggle amid the COVID-19 pandemic.
Lease fees, royalty payment and taxes from oil and gas operations accounted for about 30% of the state’s budget in recent years, according to a study from the Institute for Energy Economics and Financial Analysis. The research also found that the industry provided a quarter of the state’s operations budget last year.
But with the price per barrel of oil declining, the study suggests the financial support the industry offers New Mexico could be weakening.
Tom Sanzillo, co-author of the report, said estimates show the average price of oil will remain as low as $43 per barrel through 2022.
“It’s an improvement over the historic lows hit in April 2020, but still far below what’s needed to return New Mexico to robust fiscal health,” he said. “The situation is unlikely to improve anytime soon.”