Oil, Natural Gas Prices on the Rise, But NM Production Declining

Rising oil and natural gas prices usually result in a corresponding increase in production. Not so in New Mexico, according to an industry report prepared by the Bureau of Business and Economic Research at the University of New Mexico.

Despite the price per barrel of oil rising 25 percent from the fourth quarter of 2004 to the fourth quarter of 2005, production during that time period was down 5.8 percent. During the same period, natural gas prices (per MFC) were up 58.6 percent, but the volume of natural gas sales, which equates to production, was down 4 percent.

Normally, higher prices for the resources mean more drilling and exploration takes place. Oil that might not be as cost-effective to extract at $30 per barrel is well worth the effort at prices of $50 or $60 per barrel, for instance. But, in New Mexico of late, that rule hasn’t held true.
MSNBC.com