High oil and gas prices bring record revenues to Texas and New Mexico
SState budgets share the healthy profits of the oil and gas industry, collecting immense revenue and, in some cases, production records.
Fiscal data from energy-producing states shows that the same commodity boom that has pushed energy sector profits to new heights since the start of the war in Ukraine is also leaving states to the brim.
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Texas, the nation’s largest oil and natural gas producer, levies taxes at a fixed rate on the market value of each product. This means that incomes rise when oil and gas prices rise, and prices have been high all year.
The state raised $6.36 billion in tax revenue from oil production in fiscal year 2022, up 84.4% from the previous year. Revenues collected from gas production increased by 185% to $4.47 billion. Combined, oil and gas revenues for the year topped $10 billion for the first time ever.
The high collections continue even as crude oil prices have fallen from levels above $100 a barrel maintained through the spring and summer.
Texas’ oil production tax brought in $544 million in October, while the natural gas production tax brought in $410 million. Last month’s revenue was up 33% and 59%, respectively, from October 2021, according to figures from state comptroller Glenn Hegar.
In New Mexico, which shares the high-production Permian Basin with Texas and also collects royalties from production on federal and state lands within its borders, oil and gas revenues earned between January and April of this year reached more than $1.7 billion.
Revenues during the same period last year totaled just over $782 million.
A dollar increase in the price of a barrel of oil translates to about $21 million for New Mexico’s general fund, according to a guide published by the state’s Legislative Finance Committee, while a 10-cent increase price per thousand cubic feet of natural gas translates to $15 million in additional revenue.
For reference, the global benchmark averaged $70.89 per barrel in 2021 and is expected to average $102 per barrel in 2022, according to the Energy Information Administration.
Small producers also benefit from the windfall. In October, Montana announced second-quarter revenue collected through the state’s oil and gas production tax, which was nearly double that collected in the second quarter of 2021.
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Oil and gas companies, especially the biggest ones, have come under intense scrutiny from President Joe Biden and other Democratic politicians for reporting back-to-back quarters of soaring profits while that consumers pay more for gasoline and other products.
Biden recently threatened to impose a windfall tax on the sector if he did not invest more of his profits to increase production and add refining capacity. He accused them of unethically profiting from the war by disrupting energy markets in Ukraine.
The industry has dismissed Biden’s accusations, arguing that oil market dynamics rather than individual companies are responsible for oil and gasoline prices.