Oil prices mean big break for most Americans but can...

For all newcomers to Houston, here's a nifty tip: The U.S. and Texas economies are often on opposite sides of a seesaw.

The Texas economy has roared since oil companies learned how to drill sideways and use water to fracture shale rock. Prices for natural gas and especially oil recovered from recession-related slumps, and the technological advances triggered a drilling boom across the nation and brought billions of dollars and hundreds of thousands of jobs to Houston.

High energy prices, though, are bad for most Americans, who have to drive every day and can only turn the thermostat down so low when it gets cold outside.

When energy bills go up, consumers cut discretionary spending and the U.S. economy suffers. But when crude prices go down 30 percent as they have since June, cheaper gasoline means people have more money to spend.

Last November, Americans spent $1.2 billion a day on gasoline, according to the Energy Information Administration. Thanks to lower gasoline prices, they will spend about $1 billion a day this month.

That's a $6 billion stimulus for the U.S. economy this November alone. Keeping warm is also cheaper, with heating oil prices down 15 percent.

Since wages have remained stagnant since the Great Recession ended in 2009, these lower fuel costs are giving the U.S. economy and consumer confidence a much-needed boost. In the third quarter of this year, the first since crude prices began falling in June, the U.S. gross domestic product grew at a surprising 3.9 percent, according to a Commerce Department report released Tuesday.

The U.S. economy is set to grow even faster next year, according to the latest forecast from the University of Michigan, assuming that prices remain between $70 and $80 a barrel for West Texas Intermediate crude.

"We expect that 2015 will be the year when U.S. economic growth will finally accelerate meaningfully," University of Michigan economist Daniil Manaenkov said.

Just not in the oil patch.

Lower oil prices mean oil companies spend less on the services and equipment that Houston companies provide.

"Due to the uncertain outlook for prices and general desire of companies to protect balance sheets, we expect 2015 capital spending plans to be generally lower than or similar to 2014 levels," Standard and Poor's credit analyst Paul Harvey said in a report last week. S&P dropped its price assumption for West Texas Intermediate crude to $80 a barrel for 2015.

A significant percentage of the $6 billion that Americans will save on gasoline this month will come out of the Texas economy.

Energy jobs

Nearly half of Houston jobs are tied to the energy sector in some way, said Robert Gilmer, who heads the Institute for Regional Forecasting at the University of Houston. If oil prices recover slightly, as predicted, the best Houstonians should hope for is an economic plateau over the next three years. The Houston area will likely add only 76,000 jobs a year on average, compared with the 120,000 jobs it added this year, he said.

If oil stays around $75 a barrel or drops further, U.S. producers will be forced to cut back dramatically on drilling. Analysts at Baird Equity Research Group estimated that if prices remain at current levels, North America could see a 10 percent cut in spending by oil and gas companies and a25 percent reduction in the number of operating rigs.

Under that scenario, Gilmer said during a recent presentation, Houston would average only 50,000 new jobs a year, much slower than the rest of the nation.

"Crude in the $80-$90 a barrel range means modest cutbacks," Gilmer summed up. "At $70-$74 a barrel oil ... the Houston oil sector will be off, and that is the risk."

If the energy sector lays off just 1 percent of its workforce, that's 17,000 lost Houston jobs, he added. The sector has already seen some layoffs. Houston oil driller Hercules Offshore plans to lay off 324 rig workers, and Shell's Houston-based exploration and production unit for the Americas plans to cut 400 positions.

This pullback in oil and natural gas spending will test claims that Houston's economy has diversified.

Gilmer said cheap oil and natural gas prices mean cheaper inputs for the refineries and petrochemical plants along the Houston Ship Channel. He said the industrial boom on Houston's east side will likely continue for the next few years, keeping construction workers busy.

Diversification

Boyd Nash-Stacey, an economist at BBVA Compass Bank, predicted that the lower oil and natural gas prices will have only a mild to moderate effect on the Houston economy.

"Greater economic diversification, increased trade openness, regional and national bank financing, and absence of a real estate bubble" will cushion the blow of low crude prices, Nash-Stacey wrote in an economic forecast.

The important thing to remember, though, is that this rough spot is largely due to a wobbly global economy. When U.S. consumers buy more, workers in other countries work more, and the global economy demands more energy.

Ultimately, economies will recover in China, India and Europe, and demand for energy will return after 2017. In the meantime, Houston business people need to keep in mind that what's good for the U.S. goose is not necessarily good for the Houston gander.