A five-member panel, organized by the New Mexico Association for Commerce and Industry, discussed the impact of plummeting oil prices on local industry and the need for producers to gain access to international markets to sustain production and jobs in the state’s two oil and gas basins in northwestern and southeastern New Mexico.
The federal government has prohibited crude oil exports by domestic producers since the 1970s to ensure adequate national supplies in the face of shortages from an Arab oil embargo that decade that caused gas rationing and huge bottlenecks at pumping stations. But the ban is no longer needed in today’s world, given the huge surge in U.S. production thanks to modern drilling technologies, panelists said, and is instead harming the local and national economies.
“In Hobbs, we produce a good, and we want it treated like any other good to reach international markets,” said Hobbs Chamber of Commerce President and CEO Grant Taylor. “We thought Congress would lift the ban in 2015, but we’re now two-thirds of the way through the year, the clock is ticking, and the urgency is mounting.”
Prices for benchmark West Texas Intermediate have fallen from more than $100 a barrel early last year to below $40 as of Tuesday morning. That, in turn, has cut the bottom out of new drilling in New Mexico and elsewhere.
About 1,000 rigs have been idled nationwide since last year, said Craig Mayberry, a manager with Process Equipment Service Co. in Farmington. About 240 jobs are directly connected to each rig, meaning more than 200,000 people have been laid off in oil-producing regions around the country.
“We had about 100 rigs operating in New Mexico before, and that’s now down to about 50,” Mayberry said. “A lot of New Mexico jobs have gone away.”
By allowing producers to export crude, production could rebound as industry gains access to more markets, Mayberry said.
“It’s an issue that strikes to the heart of communities like Farmington,” he said. “Lifting the oil ban has real consequences for people on the ground in their everyday lives.”
Legislative bills are now working their way through the U.S. House and Senate to lift the ban, but there’s been significant opposition from Democrats.
Panelists said opposition comes in part from environmentalists and clean energy advocates, who want to reduce domestic and global reliance on fossil fuels. But many U.S. oil refineries are also opposed, because producers could start sending crude to refineries outside the country, taking business away from domestic companies.
“There are concerns among American refineries about their own future,” Mayberry said. “They’re the only kids in the neighborhood right now, and some fear their power could go away.”