IN 2014 oil prices crashed. Americans jumped for joy. Small wonder: each year the average American consumes more energy than a Briton and a Japanese person put together. The oil-price drop pleased economists, too. Many were sure that it would give the economy a nice boost. However, the oil bust was followed not by a boom but a slowdown (see chart). Figures released on April 29th showed that growth in the first quarter of this year was just 0.2%. All this leads wonks to wonder: are lower oil prices such a good thing? Gross domestic product (GDP), the total annual output of an economy, is made up of four things: government spending, net exports, consumer spending and investment. The oil price does not much affect government spending, but has a big impact on the other three.

Houston faces up to cheap oil Net exports (ie, exports minus imports) have certainly been boosted by the lower oil price. America exports very little oil, but imports a lot: about 9m barrels a day. With the oil price roughly $60 below its peak, Americans now send $500m less abroad every day—or about $200 billion a year. Add to this the lower price of domestically produced oil, and Americans have received a windfall, akin to a juicy tax cut. That cash could be spent or invested at home. But consumers are reluctant to splash out, perhaps because wage growth has been so miserable. The monthly growth rate of retail sales—not including those at petrol stations—has stumbled in the past few months. The fourth component of GDP, investment, is also sluggish. Until recently lots of money was thrown at jazzy equipment to extract oil from difficult places: from 2010 to 2014 investment in mining exploration, shafts and wells increased by 80%. Now firms are cutting back, says Fitch, a rating agency. Investment in mining structures shrank at a 60% annualised rate in the first quarter of 2015, says Capital Economics, a consultancy—enough to subtract 0.8% from overall GDP growth. Lower investment goes hand-in-hand with job cuts. In March Texas, an oil state that in recent years has seen rapid job growth, saw its largest month-on-month drop since 2009.