Southwest Oil and Gas Boom Provides Fuel for National Economy
September 11, 2018
An oil and gas bonanza in Southwestern states may be helping to drive the continuing national economic boom.
The nation’s 4.2 percent growth in gross domestic product, estimated last month by the Bureau of Economic Analysis, is the highest quarterly growth since 2014. State estimates aren’t due until mid-November.
“The states that contribute most might be the ones with strong increases in energy production,” including Texas, New Mexico and Colorado, said Mark Perry, an economist at the University of Michigan and an economic analyst for the conservative-leaning American Enterprise Institute.
Oil and gas industries benefited from rising prices over the past two years, prompting more production and jobs. Production increased by nearly half in New Mexico over the past year, 29 percent in Texas and Colorado, and 19 percent in North Dakota and Oklahoma, according to federal figures as of June. Natural gas production also surged in Louisiana.
New Mexico expects almost $1.2 billion in extra tax revenue because of oil and gas next year, after struggling to make ends meet under the current budget, and is planning to set up a rainy day fund to help ease future downturns, said Jeffrey Mitchell, director of the University of New Mexico’s Bureau of Business and Economic Research. While oil and gas drilling has been concentrated near the Texas border, jobs in the state’s largest city, Albuquerque, also have increased, upturn, he said.
“The situation was bleak,” Republican Gov. Susana Martinez said recalled in her state of the state speech this year. “We find ourselves in a much different position today.”
Texas’ state budget is also expecting a surplus of about $2 billion to be split between a rainy day fund and a highway fund, said Chris Bryan, spokesman for the state Comptroller of Public Accounts.
The Texas economy has become more diversified with tech and health care, and is more likely to survive cyclical slowdowns, Bryan said.
Texas and New Mexico had the largest recent increases in oil production because of rich supplies in the Permian Basin, an underground formation spanning the two states. But state and local policy also has played a role, said Kathleen Sgamma, president of the Western Energy Alliance, a Denver-based oil and gas trade group.
“The states that have seen significant gains have reasonable policies that enable development to move forward,” Sgamma said. “Contrast that with California, which has put up multiple obstacles and as a result has slipped in the rankings.”
California ranked third last year in oil production, but was surpassed this year by New Mexico and Oklahoma and now ranks fifth at about 462,000 barrels a day as of June, according to federal figures.
Distributed by Tribune Content Agency, LLC.
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