This is the third post in a five-part series on “The Hidden Tax: New Mexico’s Energy Crisis & Path Forward.” Read Part 1 on household budgets, Part 2 on seniors and local businesses, Part 4 on the energy transition, and Part 5 on infrastructure policy.
Have you ever had one of those days where you have to fill up your gas tank, buy groceries and maybe even fill a prescription or pay a utility bill and then just sit there wondering where all your paycheck went? Those days are made harder when you then see headlines about the BILLIONS of dollars the state collects from oil companies, but then even that pales in comparison to the TRILLIONS of dollars those oil companies post in profits. It’s a common feeling for those of us here in New Mexico.
New Mexico is simultaneously one of the nation’s top oil producers and one of its poorest states, with the highest child poverty rate in the U.S. (23.3%) and 46% of households living below the ALICE Threshold. This isn’t coincidence, it’s the extractive nature of the energy economy: wealth flows out, costs stay local.
Record Profits, But Where Do They Go?
The numbers are staggering. During this most recent “energy crisis,” ExxonMobil netted $36 billion in profits and Chevron pulled in $21.4 billion—Exxon’s profitability trailed only Apple, Microsoft, and Google’s parent company Alphabet. Six of the world’s biggest fossil fuel companies are on track to make $2,967 per second in profits during 2026.
But here’s the critical question: Who actually benefits from these record profits?
The answer reveals the geography of extraction economics. The vast majority of these profits flow to:
- Shareholders and institutional investors concentrated in New York, Boston, and other financial centers
- Corporate headquarters located in Texas, California, and Delaware, NOT New Mexico
- Traders and executives whose compensation packages are tied to stock performance, not community wellbeing
Few oil and gas companies are headquartered in New Mexico, despite the state being the second-largest oil producer in the nation. The Dallas Federal Reserve notes that while New Mexico’s oil production surpassed 2 million barrels per day in 2024 (more than doubling 2019 output), the economic benefits are largely exported.
This creates a stark disconnect: New Mexico communities bear the environmental costs (air and water pollution, increased traffic accidents, infrastructure damage), the health costs (higher rates of respiratory illness, stress from economic volatility), and the social costs (housing instability during boom-bust cycles, strain on local services). Meanwhile, the profits generated from extracting their resources flow to shareholders who’ve never set foot in Eddy or Lea County. As the Center for American Progress observed: “Oil exports are not lifting all boats.” New Mexico faces high wealth inequality and low wages despite the boom.
The Revenue Picture
Yes, New Mexico’s state government has benefited from the oil boom, but the picture is far more nuanced than “more revenue = better for citizens.”
The Revenue Picture:
- Oil and gas generated $15.2 billion for New Mexico in FY2024
- The state collected $12.3 billion in FY2023, representing 19.7% of production value—the highest rate among major producing states
- Oil and gas revenues account for 26.9% of ALL state and local revenue, and a stunning 56.1% of state and local own-source tax revenue
- These funds support education (including the Land Grant Permanent Fund), healthcare (Medicaid), early childhood programs, and infrastructure
But Here’s What That Revenue Doesn’t Cover:
- Local governments bear the bust risk: While the state invests roughly half its oil revenues in permanent funds (a smart long-term strategy), local governments receive only about 10% of revenues. Eddy and Lea counties—where most production occurs, with a combined population of 130,000 out of 2 million statewide—face volatile revenues without the cushion of permanent funds. As Resources for the Future reports: “None of these states have policies to protect the finances of the local governments in host communities, which may face significant fiscal risk from short-term booms and busts.”
- State revenue doesn’t offset household costs: Yes, the state budget benefits—but individual New Mexicans are paying far more at the pump, at the grocery store, and in utility bills. Remember:
- New Mexico families spend $286.39 per week on groceries (6th highest in the nation)
- 46% of households cannot afford basic necessities despite the oil boom
- 32% of adults rationed medication due to cost
- The state’s child food insecurity rate is 23.3%—the highest in the U.S.
- Permanent funds help tomorrow, not today: New Mexico’s permanent funds are projected to exceed annual oil and gas revenues by 2039—a remarkable achievement. But that doesn’t help the single mother in Silver City choosing between filling her truck tank and buying insulin today.
The Hidden Costs to Families
The average New Mexican family pays $2,074 per year in hidden costs from deteriorated roads alone, far more than they’d ever save from any oil revenue “boom.” When you add:
- Higher gas prices (with limited public transit alternatives in rural areas)
- Higher grocery bills (as diesel costs drive up food transportation)
- Higher utility bills (as natural gas prices climb)
- Higher healthcare costs (as pharmaceutical supply chains face disruption)
The math becomes clear: the oil boom benefits the state budget while households pay the price.
The Resource Curse Dynamic
Economic research shows that oil and gas communities often suffer from a “resource curse,” short-term booms create long-term dependency without diversified economic development. New Mexico is trying to break this cycle through its “Empower and Collaborate” economic plan, which aims to diversify away from extraction.
As the Center for American Progress notes: “New Mexico’s economic future will not be transformed by short-term tax cuts and subsidies but rather through deliberate investments in long-term resilience.“
But here’s the paradox: the state is trying to transition *away* from oil and gas while simultaneously depending on it for roughly 35% of its state budget.
Federal Policy Changes Threaten Revenue
The One Big Beautiful Bill Act passed in July 2025 reduces federal royalty rates from 16.67% to 12.5%, which will reduce New Mexico’s federal leasing revenues by an estimated $1.7 billion from 2026 to 2035. This revenue loss will hit just as global energy transitions may reduce demand. Coupled with reduced enforcement of federal methane rules and other safeguards, the costs to local communities will only increase from these federal policies.
The Bottom Line for New Mexico
The state government may see increased tax receipts, but that revenue doesn’t flow directly to households facing higher costs. In fact, the oil boom has enabled the state to lower other taxes, which decouples the revenue structure from the underlying economy and creates long-term fiscal risk.
As one New Mexico advocate put it: “Our most vulnerable communities and ecosystems, who’ve paid the highest price for extraction, deserve a say in their future.“
The winners and losers divide isn’t just about companies vs. consumers, it’s about where wealth accumulates vs. where costs are borne. In New Mexico’s case, the profits leave the state while the consequences stay home.
What’s Next in This Series
The crisis extends beyond extraction economics. In Part 4, we’ll dive into the state’s Energy Transition Act and the paradox of funding a post-oil future with oil money. And in Part 5, we’ll look at why gas tax holidays are a dangerous fix that makes the problem worse.
What You Can Do
- Demand transparency: Ask policymakers how oil revenues are actually being spent in your community
- Support diversification: Advocate for investment in non-extraction industries like aerospace, cybersecurity, and renewable energy
- Protect local governments: Push for policies that give host communities more direct revenue from extraction
- Share your story: Tell policymakers how the oil boom or bust affects your household budget
Bottom Line: New Mexico’s oil wealth creates a fiscal illusion: state coffers overflow while families struggle. The path forward requires honest acknowledgment that you can’t fund a post-oil future indefinitely with oil money—and that communities bearing extraction costs deserve direct benefits, not just environmental burdens.