Perhaps no other state in the nation has a bigger stake in robust oil and gas production than New Mexico. But that stake is at serious risk due to the inability of our state’s oil producers to find enough customers to buy their now abundant supply.
The reason: In the 1970s, during the Arab oil embargo that ignited a U.S. energy crisis, Congress enacted laws prohibiting domestically produced crude oil from being exported. The export ban is still on the books and continues to forbid American job creators from exporting their product.
Oil and gas production is the lifeblood of New Mexico’s economy: 69,000 jobs – 9 percent of all New Mexican employment – are tied to oil and gas development. In 2013, state revenue from oil and gas accounted for 31.5 percent of the state’s general fund and was directly responsible for paying for 85 percent of the state’s capital projects.
In 2014, oil and gas was directly responsible for generating $726 million for schools, universities and public hospitals. Cities, counties and Native American tribal governments rely on oil and gas property tax assessments. In 2013, $835 million in royalties was sent to Washington for oil and gas production on federal lands in New Mexico.
With improvements in technology, such as hydraulic fracturing, the U.S. has entered a new “Age of Energy Abundance.” America is now No. 1 in the world in oil production – surpassing Saudi Arabia and Russia.
New Mexico has contributed heavily to this growth. This historic expansion comes at a time when the world is awash with surplus oil, plunging the global price of oil in the last six months from $115 to just under $45 this week.
Now the antiquated export ban is making matters even worse for New Mexico and other U.S. oil producers by preventing them from finding buyers abroad for the surplus reserves that U.S. refiners cannot process. The effect of allowing only U.S. buyers to buy American crude is that it further cuts the price that U.S. producers receive – even below the severely depressed world price.
New Mexico producers cannot afford to continue to invest in new drilling projects. Rigs are being laid down and the spin-off gains for New Mexico are weakening.
Specifically, the export ban translates into lost jobs, lost taxes and decreased royalties; losses with heavy consequences for New Mexico.
Beyond its economic value to our state and nation, allowing international allies to buy our oil advances our national security interest. As we develop closer economic ties, our trade partners become better geopolitical allies. The world wants to buy U.S. oil; our international allies and trade partners want to look to the U.S. for their energy security.
The president has agreed with all these concepts. In his 2010 State of the Union Address, President Obama told Americans: “We will double our exports over the next five years, an increase that will support two million jobs in America.”
As his remarks make clear, the administration publicly touts expanding trade to create jobs. I agree with the president on this point; that’s why it’s time for Washington to remove export barriers and stick a “Made in America” sale tag on New Mexico’s abundant oil and gas reserves.
Since the 1970s, the president has had the statutory authority to change this policy on his own. Likewise, if the president does not act, the Congress can remove the prohibition.
Either way, it is time to lift the destructive oil export ban. Washington should deliver this win-win for the nation and New Mexico.