Gasoline in New Mexico is the most expensive it’s been in seven years and continues to rise. In the early stages of the COVID-19 pandemic, the market for gasoline collapsed as demand plummeted. The Organization of the Petroleum Exporting Countries has yet to fully recover production efforts though in-person commitments and adjacent demand for the product have largely resumed.
The higher demand, limited supply and elevated crude oil prices have resulted in the increase of gas prices, according to American Automobile Association New Mexico spokesperson Daniel Armbruster. He said the statewide average cost per gallon throughout New Mexico is around $3.31 and continues to increase each week. Armbruster said the price per gallon this time last year was around $2.
“Global oil production is still below pre-pandemic levels,” Armbruster said. “Since the cost of oil accounts for more than half the cost we pay at the pump, drivers are certainly paying more as long as the crude oil prices remain high.”
Armbruster said the Biden administration called on OPEC to increase oil production “faster than previously planned” to mitigate supply shortages.
Rising gas and oil prices are a “worldwide phenomenon” and can’t be attributed to state or federal leaders, according to Jamie Chermak, professor and department chair of economics at the University of New Mexico.
“Energy and politics always seem to be very intertwined and are probably becoming more so because of the increased focus on emissions and carbon dioxide,” Chermak said.
Though OPEC is not accelerating production as much as the White House requested, they will increase output by 400,000 barrels per day in early November, according to Armbruster.
Yuting Yang, an assistant professor of economics at UNM, said the statewide increase in the cost of oil and gas opens the door for investors and consumers to choose more sustainable energy options and make transitions toward renewable energy sources for electricity, such as wind and solar.
“This increase in price is actually a good signal ... towards decreasing the consumption of fossil fuels,” Yang said.
A sustained lack of supply and continued demand for energy resources has the potential to propel consumers away from oil and gas and toward renewable energy sources, Yang said.
“Right now, given the current prices, we will anticipate to see that people also shift to hybrid, electric vehicles that can likely save them more money in the long run,” Yang said.
Yang said solar and wind energy would be optimal energy sources to maximize productivity in New Mexico given the climate.
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“(Wind, solar and geothermal energy) are still costly compared to gas, coal, nuclear and hydro(power),” Yang said. “To have a pure, clean grid, you would have to have a combination of all the different sources you can get because they produce at different times.”
Though wind and solar power have a costly startup and would have to be used intermittently and interchangeably due to their reliance on the weather conditions, Yang said “investors wouldn’t lose money in the long run.”
“If we are to cut back on gas and oil production and use more renewables, (New Mexico) would need to find alternative sources for taxation (and) public spending,” Yang said.
Though New Mexico is the third-greatest producer of oil in the U.S. due to production in the Permian Basin, Chermak said the majority of that supply is exported.
Rebecca Hobart is a beat reporter at the Daily Lobo. She can be contacted at email@example.com or on Twitter @rjhobart