The recent plunge in oil prices comes with an alarming forecast from one of the key players in the Permian Basin in NM and Texas that is so vital to the state's financial future.

Diamondback Energy, the largest independent oil producer in the Permian, has called the peak of oil production there. 

The Permian has propelled America to become the world's leading oil producer while filling New Mexico's coffers with previously unimaginable sums of money, making possible a massive increase in the state budget and sustaining the economies of SE NM.

Because of the long oil shale boom, the state's various Permanent Funds have exploded to $60 billion in a state with a population that for years has hovered around 2 million.

More on the Diamondback prediction amid falling oil prices:

The largest independent oil producer in the Permian Basin says production has likely peaked in America’s prolific shale fields and will decline in the months ahead after crude prices plummeted. The Texas company trimmed its own full-year production forecast and said to investors that it expects onshore oil rigs across the entire US industry to drop by almost 10% by the end of the second quarter and fall further in the months after. 

This doesn't mean that New Mexico is about to experience a financial crash as it has previously when oil prices and production have cratered. But it does signal that the go-go budget years are history and that the amount of money coming from the Permian is beginning what will be a long but slow decline.

Enormous surpluses already set aside give the state plenty of breathing room to deal with this new energy paradigm. Also, the state recently raised certain royalty rates for oil and gas production from 20 percent to 25 percent.

Unlike previous booms fracking has been employed to get more oil out of the ground. It has been less expensive than other methods. New oil wells, however, will be more expensive to develop because of higher costs and will be less profitable at lower oil prices.

Energy royalties and taxes have come to finance 40 percent of the state budget which for the next fiscal is $10.8 billion. That's about 75 percent higher than the $6.2 billion budget approved in 2018, seven years ago.

One noticeable impact of that plenty has been the expansive funding for early childhood education and subsequent improvement in the state's rankings. Critics however, continue to point to the state's overall low ratings in key areas despite the massive cash influx.

ALSO WATCHING. . .

Other developments the econ watches are keeping an eye on are tourism and federal spending, 

Tourism, a cornerstone of the state economy, especially Santa Fe and the north, is about to take a hit from the decline in international travel. Canada backing away from the USA over policy and nervousness from overseas tourists about coming here will be felt this summer on the Plazas of Santa Fe and Taos. 

Then there's the state's crucial federal funding as the Trump administration looks everywhere for budget cuts. Uncertainty is the order of the day. While the national labs--Sandia and Los Alamos--appear to be a safe harbor (if there is such a thing) other federal agencies and programs have more exposure to possible cuts. If permanent NM cuts will come and when is up in the air as the DC chaos continues.

This is the Home of New Mexico Politics.