I know it might seem to be an obvious point to make that the recent, dramatic drop in oil prices is a good thing. Indeed, numerous media reports have pointed out that falling gas prices are like a tax cut.
But some are saying that gas prices are too low. Certainly, it is going to be a negative for New Mexico’s government revenues. It could also have a significant, negative impact on parts of New Mexico’s overall economy, especially those in the Permian Basin.
Ultimately, however, low oil and gas prices are a good thing. One reason being somewhat obvious, the other rather counter-intuitive.
1) Dropping oil and gas prices put money in individuals’ pockets while taking it from government. As a supporter of a free market economy who believes (based on ample research and experience) that individuals are better stewards of their money than government, the money that lower prices at the pump will put back in New Mexicans’ pockets will be put to far better uses than money sent to Santa Fe.
Times of plenty in government, regardless of political control, typically mean more spending. Reduced funding leads to prioritization and tough decisions (even, gasp! CUTS)….which leads me to point two.
2) New Mexico’s economy is overly-reliant on the federal government and the oil/gas industries. We have desperately needed to strengthen the private sector in our state so as to not rely on DC or volatile oil and gas prices. Particularly in light of the recent electoral results, New Mexico is ripe for significant reforms that should lead to a more competitive private sector. Those who don’t take the need for reform seriously enough already will face the additional, persuasive factor that the 31% of our State’s budget provided by oil and gas is going to be shrinking significantly in coming years.