Created: March 10, 2020 12:10 AM
ALBUQUERQUE, N.M.— While the coronavirus is sending shockwaves throughout Wall Street, New Mexico is experiencing its own financial fallout as oil and gas prices drop.
The price drop could be problematic for the state budget, which relies heavily on oil and gas. The state gets roughly 40% of its revenue from the oil and gas industry.
State officials were planning to spend an extra $600 million across the state this year as a result of the oil and gas boon.
The price for a barrel of oil dropped to a low of $31.
“This means cheaper prices for consumers but it means a harder time for producers of oil to make their profits,” said UNM Professor of Finance Reilly White.
If low oil prices continue, that will likely lead back to scaled back production in New Mexico’s Permian Basin and result in more modest tax revenue for the state.
Gov. Michelle Lujan Grisham said she is monitoring the situation closely as the fate of the state budget hangs in the balance.
A spokesperson for the governor sent KOB 4 a statement that said the budget that state legislators passed is fiscally responsible:
"Although the situation is dynamic, based on the analyses we've seen, the governor is confident House Bill 2 was crafted soundly enough to avoid any need for a special session."
Meanwhile, industry leaders are urging caution.
“Prices are not ideal, but in the long term you really have to step back and look big picture at where New Mexico stands with respect to the oil and gas sector and global demand for oil continues to increase and will continue to increase for at least the next decade if not longer,” said Ryan Flynn, executive director of the New Mexico Oil and Gas Association.
A spokesperson from the governor’s office said they expect the reserves built into the budget will cover revenue shortfalls. The governor has until Wednesday to sign the state budget and she is considering making line-item cuts to pare down the budget.
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