Depence on fickle oil, gas no fun

State columnist

link Tom McDonald

It’s almost laughable the way Americans just can’t win with gasoline prices.

If they go up, it’s money out of our pockets, and if they go down, it’s money out of our investments.

Poor folks couldn’t care less about how it affects the financial markets; they’re all for the cheaper gas. Meanwhile, rich people feel no real pain at the pump, but they hate the way their investment portfolio looks when crude oil prices drop.

I suppose it’s the middle class that feels it both at the pump as well as in their 401(k), that keeps it all in check.

Surely you’ve noticed how gasoline prices and the stock market have been dropping together lately. Over the week of Dec. 8-12, the Dow Jones industrial average took its worst tumble in two months, falling 312 points by its Friday close. Also during that week, oil prices dropped 12.2 percent, ending the week at $57.81 a barrel, the lowest level since June 2009 when the U.S. was coming out of the Great Recession.

Only four years ago, in December 2010, crude oil was topping $120 a barrel, and analysts are now saying it will probably be years before it returns even to the $100-a-barrel level.

Still, there are so many positive results to these dropping prices. It’s not just cheaper fill-ups, it’s also a hedge against inflation, since just about every non-’Net-based product out there must be transported by some sort of gas- or diesel-powered engine.

Here in New Mexico, where the oil and gas industry generates about a third of our state tax revenue, lawmakers are feeling the effects of lower oil prices. About three months ago, the state was forecasting a $280 million surplus thanks to that revenue stream, but a couple of weeks ago the forecast was tweaked — taking into consideration the dramatic drop in oil prices — so now only $140 million is expected as the state’s budgetary surplus.

I’ve noticed through the years that once a surplus is predicted for the state’s coffers, it takes only a moment for the governor and legislators to start working up ways to spend it.

I’ve already spoken with lawmakers who are practically depressed over the fact that the surplus isn’t going to be as hefty as previously expected, while Gov. Susana Martinez’s administration is already proposing a massive increase in spending on education.

It reminds me of something I heard years ago in a training seminar. The speaker pointed out that there are two basic ways to grow profits. You can cut expenses and/or you can raise revenues. Cutting expenses is effective, she said, but it’s much more fun to raise revenue.

I guess the bigger the surplus, the more fun running state government is.

What isn’t fun, however, is to be dependent on a fickle oil and gas industry, and that we are.

Tom McDonald is editor of the New Mexico Community News Exchange. Contact him at:

tmcdonald@

gazettemediaservices.com