[LWVNM Action] It’s time NM diversified away fromoil, gas

[Richard Mason]

*It’s time NM diversified away from oil, gas*

*By *James Jimenez / New Mexico Voices For Children And Oriana Sandoval /
Center For Civic Policy

*Monday, November 16th, 2020 at 12:05am – ABQ Journal*

>From the supercomputing work at our national labs to the out-of-this-world
flights from our spaceport, evidence is abundant that New Mexico can meet
current and future challenges with transformative solutions. Our
legislators need to tap into our state’s well of ingenuity and knowledge
and figure out how to accelerate the diversification of our economy and
state revenue sources. And they need to do it now – while the oil and gas
industry is still with us.

The oil and gas industry is in decline, and has been for at least a decade,
according to a new economic report from the Institute for Energy Economics
and Financial Analysis (IEEFA). This isn’t the fault of the coronavirus,
but the pandemic has helped underscore some of the industry’s problems. The
report gives new urgency for New Mexico to chart a new course for a more
resilient, diversified economy, a more stable and equitable tax system, and
a more prosperous future.

Pre-pandemic New Mexico saw a boom in oil and gas extraction, which was
mirrored by an increase in state revenue. And while many state leaders
opined that this boom, being different from previous booms, was going to
last indefinitely, the reality for the industry was far more grim. “In
short,” the report states, “while New Mexico posted record oil and gas
revenues, the oil and gas industry itself was reporting steep losses.”

Among the key findings:

Prices for New Mexico’s oil and gas have been declining since 2014. From
2015 to 2019, prices fell an average of 44% – and that was before the
pandemic.

The industry is so cash-poor that the five largest publicly traded oil and
gas companies have been unable to pay shareholder dividends. Since 2010
they have funded shareholder dividends by selling off assets and taking on
new debt.

Investors are taking notice. While there once were seven oil and gas
companies in the S&P’s 500 Index top 10, today there are none.

The growth in electric vehicles is helping drive down demand for gasoline.
A new report predicts that the electric vehicle share of passenger vehicle
sales will rise to more than 50% by 2040. It concludes that oil demand from
passenger vehicles will never recover to 2019 levels.

Fundamental changes in the economy now support growth strategies that
require less dependence on fossil fuels. Energy experts now chart corporate
strategies to address the decoupling of economic growth from fossil fuel
growth.

We’ve long known that our oil and gas resources are finite, but we must
consider the possibility that the demand for them may die before the
resources themselves are depleted. IEEFA’s report gives new urgency to the
state’s need to diversify its revenue sources to rely more heavily on those
that are more stable and longer lasting.

IEEFA’s report concludes that years of over-production have been
unprofitable and unsustainable, and the oil and gas industry in New Mexico
may never rebound to previous levels. That means we cannot rely on oil and
gas for the revenue we need to staff our classrooms and hospitals, pay our
first responders, pave our roads and more.

Legislators can’t control demand for oil, but they have many ways to help
stabilize the state’s revenue, and they should start by repealing failed
tax cuts for the wealthy and out-of-state corporations. Since those tax
breaks failed to produce the promised jobs, they stand simply as corporate
welfare – something New Mexico can’t afford.

*We can’t wait. New Mexicans need bold and innovative solutions from our
policymakers to accelerate the diversification of our state’s economy,
restructure our tax system with an emphasis on equity, stability and
accountability, and strategically invest in our most precious asset – our
people. This is how we build a more sustainable, prosperous future for our
state.*
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