Has anyone noticed a change in the economy now that gas prices have decreased? (Houston: apartments)

[Deelightful]

Hello everyone,

I'm slowly but surely trying to make my way to Texas. When I was watching the news, they state that gas prices have a direct effect on the economy in Texas. I do understand that this is just one factor that effects your economy, but I'm wondering if this would be a major factor? Has there been any discussion about this? Would you say that the economy is still thriving?

Thank you.

[SmartGXL]

Here is how I see it:

-The Texas government does get a large part of their revenues from the oil extraction taxes on oil rigs in the state. The tax collected is a % of the price of oil that day (this is why there is no need for a state income tax in Texas). So, lower oil prices does mean lower revenue collected.

-This isnt much of a big deal, because the way the State of Texas runs their checkbook and finances, is they dont borrow heavily for projects, spending, etc. What they will do, is fund the budget two years into the future. So, when oil prices drop, it can affect highway spending etc two years down the road. Occasionally, you will see highway overpasses etc that are sitting half complete, because the funding ran out. Then, later, when gas prices go back up, they resume construction.

-Because of its reliance on oil as a big part of the economy, Texas is a very "boom and bust" kind of place. The economy is starting to diversify a little bit, but there is still a heavy reliance. However, most of this reliance is in the Houston area, and out in west Texas. Dallas, Austin, and El Paso are not as affected by this.

-I had read somewhere that apartments in Houston are already starting to discount their prices, but I do not know how truthful the report may have been.

[mark311]

Prices have already gone back up a bit anyway. I paid $1.56 at HEB in Cedar Park on January 11th when the prices were at the very bottom. I just paid $2.04 there yesterday so prices have gone up about 30% in the past 6 weeks from what I saw as a low at my gas station on January 11th at 7pm.

[ericsami]

It is not as simple as the 80s. for the country lower energy prices are a net positive. after all the bankruptcies have been digested That is.

Lower oil prices for Texas in the short term is likely that it is a negative.

however in intermediate term (if prices remain low for a number of years) It will likely be neutral for Texas because we will start receiving more industries that are energy intensive consumers. (let's say Petro chemical plants). or more auto makers like Toyota.

but in the long term very low oil prices is likely a sign of a global slow down. because historically oil is becoming harder and harder to find and then to extract. This likely means that demand in India, China, Japan, Brazil, Korea, EU, Indonesia, Australia, Malysia is very weak. which eventually means those business benefiting from lower energy prices will be hurt as well.

the very long answer is: It is complicated.
the economy is never on a full equilibrium.

[scm53]

Originally Posted by SmartGXL

Here is how I see it:

-The Texas government does get a large part of their revenues from the oil extraction taxes on oil rigs in the state.

Well, if 3% is "a large part of their revenues", then you would be correct.

As far as "reliance on oil as a big part of the economy", there are about 12.4 million jobs in the state. There are right at 200,000 in oil and gas production, extraction, and support services -- so less than 2%. So, if 3% is "large", guess 2% is "big".

[SmartGXL]

Originally Posted by scm53

Well, if 3% is "a large part of their revenues", then you would be correct.

As far as "reliance on oil as a big part of the economy", there are about 12.4 million jobs in the state. There are right at 200,000 in oil and gas production, extraction, and support services -- so less than 2%. So, if 3% is "large", guess 2% is "big".

I dont dispute your numbers, but I just want to clarify, I was referring to the state government's tax revenue, as opposed to the numbers of people employed.

[Modification Specialist]

In New York gas prices are typically about 20 to 30 cents higher than the national average. The cheapest back in October went down to $2.17 per gallon. Now they are creeping back up to $2.50

• Past history shows October always had the lowest prices for gas.

• In the spring the prices always went up due to some "world" emergency.

• Wondering what the reason will be when gas prices raise again in the coming months...

• See national average with gas prices Link

[scm53]

Originally Posted by SmartGXL

I dont dispute your numbers, but I just want to clarify, I was referring to the state government's tax revenue, as opposed to the numbers of people employed.

I was referring to both, independently. Severance tax revenue is 3% of the state's total tax revenue - hardly a "large part".

[centralaustinite]

Umm . . . gas prices will rise when the price of crude oil on the open market rises.

I believe Texas was/is operating on projections of crude oil to be at $67 per barrel, which was a very conservative estimate at the time, and I think West Texas intermediate will be around that range, ($49.75 as I write) so it shouldn't impact the state budget too badly. Louisiana bet their state budget on crude prices remaining around $97 per barrel, so they are hurting!