New Mexico wary of oil downturn as agencies trim budgets
SANTA FE - State legislators kept a wary eye Tuesday on trends in oil prices and production as the number of active drilling rigs and new wells has plummeted from pre-pandemic levels, threatening a crucial source of state income amid the coronavirus pandemic.
A report from the budget and accountability office of the Legislature found that drilling for new petroleum wells in New Mexico's share of the Permian Basin declined to 134 wells in September, down from 589 wells in September 2019.
Reduced oilfield activity has rippled through the New Mexico economy. The U.S. Bureau of Labor Statistics estimates the oil and mining sector lost 7,400 jobs since February.
New Mexico typically relies on income from the oil and natural gas sectors through a variety of taxes, royalties and lease purchases for more than one-quarter of its annual general fund budget.
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Oil market analyst Bernadette Johnson of Enverus briefed a budget-writing committee of the Legislature on the outlook for oil prices amid lagging demand.
"A lot of folks are working from home, they're not using as much gasoline as they were before," Johnson told members of the Legislative Finance Committee via webcast.
She expects natural gas prices to increase in 2021, but said demand and prices for oil will take longer to recover.
"The biggest impact to commodity markets right now? It's demand, it's COVID," she said.