The Good, and the Bad, of New Mexico’s Petroleum Boom

It’s looking more and more like the 2018 session will produce zilch in terms of legislation that would boost economic development. Right to work, tax reform, school choice — they just aren’t going to happen, given the current ideological makeup of the Roundhouse.

So for at least another year, the Land of Enchantment will be relying on the petroleum boom to sustain its economy.

First, the good news.

Petroleum “production in southeast New Mexico’s Permian Basin is coming back to life after an almost three-year bust, driving the state to third in production of crude oil in America.” Susan Crockett, president of the Carlsbad Department of Development and chairwoman of the Eddy County Commission, recently told the Santa Fe New Mexican that as many as 5,000 jobs could be coming to New Mexico’s portion of the Permian over the next few months.

Times are so good, the U.S. is now exporting oil to the Middle East. And the years and decades ahead could yield even happier results. According to the federal government’s latest Annual Energy Outlook, released this week, U.S. crude oil and natural gas plant liquids production will continue to rise. (See chart above.)

But petroleum is a rough industry. Price is ruled by the world market, and dozens of factors influence supply and demand. Good years are often offset by downright depressing periods. How smart is it for a state to base its economic health on a volatile commodity?

And it’s not like New Mexico doesn’t have competition. Never mind production growth abroad. The Trump administration is looking at allowing “new offshore oil and gas drilling in nearly all United States coastal waters.” The Bakken play “is roaring back to life.” Burnett Oil Co. is conducting seismic surveys in the swamps of Big Cypress National Preserve. And deepwater platforms in the Gulf of Mexico are tapping more crude than ever.

New Mexico would be a dismal place without its oil-and-gas industry. But relying on it to carry the load of job-creation and revenue-generation is asking far too much. Why not implement reforms to make the Land of Enchantment appealing for all types of businesses?

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