COVID-19 and falling oil prices impacting New Mexico and Eddy County economy

Mike Smith
Carlsbad Current-Argus

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Efforts to mitigate the impact of COVID-19 was affecting major components of New Mexico's and Eddy County's economy, according to economic experts.

As of Thursday, 35 confirmed cases of the COVID-19 coronavirus, were reported in New Mexico, per the New Mexico Department of Health. 

Dr. Jim Peach, an emeritus economics professor from New Mexico State University, said tourism could be the first causality of coronavirus.

“Who wants to get on an airplane and fly? And who wants to go and stay in a hotel, if you don’t have too. We’re going to lose a lot of tourism dollars,” he said.

Jim Peach, economics professor emeritus from New Mexico State University, says the oil and gas industry has taken a major hit from COVID-19 and falling oil prices.

“We’re going to have a big hit in New Mexico, as is the rest of the nation.”

According to the New Mexico Tourism Department, visitors to the state spent $7.1 billion in 2018. That growth was expected to continue trending upward throughout the state.

In Eddy County Carlsbad Caverns National Park generated about $30.2 million in “gateway” communities, or communities near the park, in 2018 according to a report from the National Park Service.

On Wednesday, Gov. Michelle Lujan Grisham and the New Mexico Department of Health issued orders for hotel, motel and other overnight accommodations to limit occupancy to 50 percent of capacity. Restaurants were ordered to serve meals only via take-out.

And  Peach said those in the oil and gas industry, New Mexico's largest revenue producer, should prepare for a fallout from COVID-19 along with declining oil prices.

“Nobody can drill profitably for $30 a barrel,” he said. 

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“Every Friday, Baker Hughes releases the active rig count, last Friday (March 13) they said we had 117 active rigs in New Mexico. That’s going to fall. I don’t know what it will be."

Staff from the U.S. Department of the Interior tour an oil rig, Feb. 6, 2019 at Watson Hopper in Hobbs.

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In response to a staggering drop in oil prices led by the cornavirus pandemic oil and gas producers were reducing production. Apache Corporation cut its Permian Basin drilling rigs to zero while Pioneer Resources cut its rigs in half, from 22 to 11.

“We’re facing a real serious crisis," Peach said.

Executive Director of the Carlsbad Department of Development John Waters discusses Carlsbad's housing shortage, Jan. 29, 2019 at the Roundhouse.

Carlsbad Department of Development Executive Director John Waters said layoffs may be inevitable due to COVID-19 and the slump in prices.

“I have spoken with Chevron, some of the local folks for Chevron, and they’re telling us at least for the time being they’re OK. Many of the bigger companies have seen ups and downs and so their business plan is to be prepared for those eventualities," he said.

“A smaller company that is just starting out, especially some of the local companies, if a contract is cancelled, they’re service companies, these folks can’t pay their employees. These folks are going to be out of work.”

More:Oil companies cut Permian Basin operations amid staggering price drop led by coronavirus

Waters said he expected Carlsbad, a resilient community of blue-collar workers and a diverse economy base, to recover quickly, however.

“I fully believe we’ll get back on our feet and we’ll do it quickly, just because of the hard-working people that are here.”

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While coronavirus, the price of oil and the stock market have caused angst for the past couple of weeks, a Carlsbad financial planner urged people to stay calm.

Aaron Irving of Oakley and Irving Wealth Management LLC in Carlsbad reminds investors not to panic during COVID-19.

“The markets have been so crazy, because we don’t yet have visibility into how many coronavirus cases there will ultimately be, and how long a good portion of our economy will be slowed down or shut down," said Aaron Irving of Oakley and Irving Wealth Management, LLC.

Irving said the Dow Jones Industrial average was mixed this week as stocks were down Monday and Wednesday.

Stocks finished on the positive side Tuesday and Thursday, according to Irving.

“As we begin to see the number of new coronavirus cases level off, and we can get a handle on when businesses will be able to reopen at regular capacity, we should see the market start to become more stable as well.”

Irving cited data from Ned Davis Research that shows the stock market has corrected itself about 31 times since 1980.

Of those 31 corrections, the average return was 23 percent after the corrections, per the data.

Corrections happen when a stock drops by more than 10 percent and then rises during a long term period, according to Charles Stock market returns are a form of profit through trading or dividends given by a company from its shareholders, per the Economy Watch website. 

“We continue to closely monitor the rapidly changing information of COVID-19 and we intend to follow the protocols set out by the CDC  and our state and local government officials,” he said.

Mike Smith can be reached at 575-628-5546 or by email at or @ArgusMichae on Twitter.