Contact: Erika Martinez
(505) 986-4263
Erika.Martinez@nmlegis.gov
FOR IMMEDIATE RELEASE
February 3, 2015
Senator John Sapien Acknowledges While Gas and Oil Prices Seem Nice at the Pump, It Will Affect State Budget Negatively
Santa Fe, NM – This week, the Senate Education Committee met with Dr. Daniel Fine of the New Mexico Institute of Mining and Technology’s Center for Energy Policy, regarding the effect of New Mexico’s current low oil and gas prices on the state’s economy. He also discussed how less money for oil exploration and production in the state, means less money for state-funded entities.
“The U.S. energy industry has become a target of the Organization of the Petroleum Exporting Countries (OPEC), and New Mexico is at risk. While it’s great to save $25 at the gas pump, what I’m concerned about is that the extra money saved is not being generated back into our economy and our schools will get less funding,” said Senate Education Committee Chair John Sapien (D-9- Bernalillo & Sandoval).
Cost of production in the U.S. is higher than that of production costs for OPEC, but American production nevertheless has challenged Saudi Arabian output at 9.5 million barrels per day. This is the cause of the current global price war and its negative effect on U.S. production. As the world’s lowest cost oil producer, Saudi Arabia has launched for the second time, in 25 years, a market share strategy to undermine the high cost of U.S. producers. Market share means maintaining production in an environment of low and falling prices.
Dr. Fine forecasts that funds available for capital outlay projects in New Mexico in 2015 will be 35 percent lower than in the 2014 budget. Fine also said that capital spending in New Mexico will decline by $1.450 billion in 2015. New Mexico is under additional revenue stress as the price of natural gas has declined 40 percent since November 2014.
Additionally, Fine explained that 17 percent of U.S. oil production comes from stripper wells. There are 400,000 of those wells in the U.S., with many in New Mexico. Each well produces an average 2.5 barrels per day. With each shutdown of a stripper well, not only are we losing production in the country, but also future oil reserves and an average of 120 jobs per well.
“This issue affects us all,” said Sen. Sapien. “If we don’t give it the proper attention it needs, our budget and our job economy will suffer. OPEC will continue drilling and producing without any restrictions. We’re going to see negative effects on our gross receipts tax, our schools, and all the departments that depend on the state budget if we don’t act. As Democrats, I know our priorities will not change and we will continue to fight for New Mexico’s education, economy and its people despite this current hurdle. ”
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