When does New Mexico need to start worrying about crude oil prices?

Up and down, and up and down.

That’s how New Mexico oilman Gregg Fulfer described the current state of the oil business. The sequence normally isn’t all that surprising for an industry that operates on a boom-and-bust cycle, but with massive political and economic uncertainty caused by sweeping national tariffs — and then quickly reversed tariffs — the short-term trend is raising more red flags than usual.

Meanwhile, the Federal Reserve released a report last month describing New Mexico as a quietly emerged “energy powerhouse” due to its huge oil presence, second only to its neighbor Texas. Thanks to the Permian Basin, the state’s production growth has even exceeded that of Texas in recent years, the report said.

But even a small drop in crude oil prices has a big impact on New Mexico, as the fossil fuel industry tends to fund upward of a third of the state’s budget. Barring a continued downward trend in prices, the state shouldn’t need to worry too much about wrecked profitability for its biggest revenue generator, though it could see fewer new wells come online.

That doesn’t mean existing operators aren’t feeling the impact.

Fulfer said the $10 drop in oil barrel prices over the last week or so isn’t hindering his operations but has him speculating about a continued softened market. He also said costs for buying equipment like pumps, which he usually gets from China, are way up. President Donald Trump announced a 145% tariff on China imports last week.

“We hope that the economy doesn’t go into a recession,” Fulfer said.

Crude oil prices have been on a downward spiral for months, at one point in January nearly hitting $80 a barrel but dropping as low as the mid-$50s this month for West Texas Intermediate, or WTI. The trend matches that of wild stock market swings caused largely by uncertainty around Trump’s aggressive tariffs.

A $1 change in the annual average price of oil has about a $59.8 million impact on state revenues, based on December 2023 data compiled by legislative analysts.

Current oil operators in New Mexico still have a while before needing to worry about negative profitability.

The average price for oil companies with existing wells to cover operating expenses is $41 a barrel, according to a 2025 first quarter survey conducted by the Federal Reserve Bank of Dallas. The cost is slightly higher for smaller firms, requiring $44 per barrel for production of fewer than 10,000 barrels a day, and lower for large firms, requiring $31 per barrel.

However, oil barrel prices are swinging low enough to impact operators looking to drill new wells. The average WTI oil price to profitably drill a new well is $65 per barrel, according to the Fed, and tariffs are likely to result in fewer wells brought online.

“In a strange twist to the administration’s hope for more domestic oil and gas production, higher steel tariffs may result in fewer wells completed due to higher completion costs, and, in particular, the cost of oil country tubular goods,” the Fed stated.