The global oil bottleneck in the Strait of Hormuz has generated an enviable—and politically sensitive—financial windfall on the other side of the world in New Mexico, a rare Democratic-dominated state where fossil fuels are a bedrock of progressive social services.
New Mexico produces more oil than any other state besides Texas, and the state’s revenue from taxes, royalties and lease sales helps cover the cost of college tuition, all school meals, health insurance and a new initiative for free universal child care.
Now that oil prices are surging from the conflict with Iran, money is flooding into the state treasury and creating an uncomfortable situation for Democrats who oppose the war and would rather reduce their reliance on fossil fuels.
“It’s hard for people to think about, ‘Oh great, we have this windfall,’ and children are getting killed on the other side of the world,” said Deb Haaland, the former U.S. Interior Department secretary running for governor.
Haaland is one of two Democrats running to succeed Gov. Michelle Lujan Grisham, who is wrapping up her second term in office. A former congresswoman and state party chair, Haaland worked to limit unfettered oil and gas exploration while serving in President Joe Biden’s Cabinet.
Now she wants to use money amid the energy boom to increase New Mexico’s child tax credit and boost the refundable working families tax credit, payouts that would most benefit people with low incomes.
“We have obligations to try to have a better world overall,” said Haaland, a member of Laguna Pueblo who could become the first female Native American governor in the U.S. “I think we can do that.”
Her rival for the Democratic nomination, Albuquerque-based District Attorney Sam Bregman, said he wants to offset inflation with one-time $500 checks from the state to residents making less than $200,000 a year. He also wants to waive personal income taxes on residents 65 and older.
“It is the resources of the people that’s generating that revenue,” he said. “We ought to give it back to the people.”
For every $1 fluctuation in the average annual price of oil, New Mexico sees a roughly $59 million swing in state government income.
That means the state is likely to see a $850 million surge in annual state government income for the budget year ending in June alone based on war-time price changes — equivalent to 12% of annual general fund spending, according to the state Legislature’s budget and accountability office.
New Mexico sends much of its relatively heavy crude oil from its patch of the Permian Basin to Texas distribution hubs and refineries along the Gulf Coast. Prices could remain high with no end in sight for the war despite a fragile ceasefire.
