Energy economy booming in Houston

Pittsburgh Tribune-Review: Energy economy booming in Houston

By The Associated Press
Sunday, April 6, 2008

HOUSTON — Filling up in the nation’s energy capital is as painful as anywhere these days. Twenty bucks barely makes a dent on the gauge when gasoline prices are $3.25 a gallon and edging higher.

But after filling up in Houston, you’re not likely to drive far before seeing an active construction site. Check the local classified ads and it’s hard to miss the pages of job openings, particularly in the oil field.

While much of America wrestles with a mortgage crisis, a credit crunch and higher living costs, the nation’s fourth-largest city is bustling. At 3.4 percent, February’s job growth in Houston led the nation among the 12 largest metropolitan areas in the past year, government figures show.

That was down slightly from its January rate of 3.9 percent but still far ahead of the national average of 0.6 percent.

The housing market, though slowing somewhat, remains relatively strong compared with other big cities. And Houston’s manufacturing and construction sectors are growing, bucking the national trend.

No wonder the Census Bureau has said metropolitan Houston, home to about 5.5 million people, ranked as one of the country’s biggest population gainers in the past year.

“The energy economy is booming, there’s no other way to describe it,” said Barton Smith, director of the Institute for Regional Forecasting at the University of Houston. “It’s contributing significantly to this anomaly in a recessionary national economy.”

With oil prices at historical highs topping $100 a barrel, this is no time for companies involved in finding and producing crude to be sitting idly by. In Houston, that includes ConocoPhillips and Marathon Oil Corp., which rank among the biggest U.S. oil companies, as well as the U.S. operations for European oil giants BP PLC and Royal Dutch Shell PLC, both with high profiles in Houston.

It’s created frenetic activity at hundreds of smaller independent oil companies that call Houston home, many of which contributed to the 86,000 jobs Houston employers added between February 2007 and February 2008.

In some cases, energy companies are having a hard time finding enough workers, particularly engineers. Last Sunday, the Houston Chronicle jobs section totaled 14 pages — BP, Occidental Petroleum Corp. and Plains Exploration & Production Co. among the advertisers.

But it’s not only oil and gas driving Houston’s economic engine.

Construction jobs rose nearly 5 percent in metro Houston on an annual basis in February, while manufacturing employment rose about 2 percent, according to the Texas Workforce Commission.

“Two percent growth is not huge, but it’s not acting as a drag on the rest of the economy like other places,” said Cheryl Abbot, a regional economist at the commission.

Among upcoming retail additions, Dunkin’ Donuts has said it plans to increase the number of its pink-and-orange restaurants from just a few to more than 150 in the Houston area in the next several years — part of an aggressive national growth strategy.

Rooms to Go, which sells affordable furniture at 130 stores primarily in the southeast United States, opened its first Houston location last weekend and plans to open three more before Memorial Day. Also on tap is a 1 million-square-foot distribution center in the area.

“We’re bullish on the market, and I certainly don’t expect those four stores will be it for Houston,” said Morton Seaman, the privately held company’s vice chairman.

What’s more, an $805 million bond issue for school construction that Houston voters approved bodes well for construction jobs in the coming years. The Houston Independent School District, the nation’s seventh-largest public school district, has said it will use the money to build 24 new schools and renovate 134 others.

And Houston isn’t shy about its bragging rights. After the release of a book that lovingly promotes Houston’s characteristic giant cockroaches, heat and hurricanes, local business leaders rounded up Houston celebrities such as Beyonce, heart surgery pioneer Denton Cooley, A.J. Foyt and George Bush to extoll the city’s other virtues.

For now, Smith estimates two-thirds of Houston’s economic growth is pegged to energy, though he forecasts that ratio will move closer to half within the next couple of years.

And who knows where the price of oil is headed?

Some analysts believe the current high prices aren’t supported by underlying supply-and-demand fundamentals and predict prices could fall to $70, or lower, this year. Others believe strong global demand for oil, especially from surging economies in China and India, will underpin prices for years to come. They say oil could rise to $120 a barrel, or higher, in coming months.

“By 2010, we think the Houston economy is going to moderate somewhat,” Smith said. “One of the benefits of that, however, is (the economy is) likely to be more balanced than it is today.”

Other major employers in the Houston area include the Texas Medical Center, which employs about 100,000 people in medicine and research and related fields. NASA’s Johnson Space Center and contract companies also employ another approximately 100,000, but about 2,300 of those are expected to evaporate when the space shuttle program ends in 2010.

Not every area of the local economy is thriving.

New vehicle sales were down 22.6 percent in February from a year ago, and residential real estate closings were off 13 percent, according to figures compiled by the Greater Houston Partnership, the local chamber of commerce.

Mark Dotzour, chief economist at a real estate think tank at Texas A&M University, said one of the reasons for the drop in home closings year-over-year is tougher credit standards of late that affect potential buyers everywhere.

Still, home prices remain fairly stable — and among the lowest in the nation.

Dotzour said prices typically start to decline when a particular market has an inventory of homes that would take nine months to deplete based on recent sales activity. Houston currently has about a six-month supply, well below the national inventory of about 10 months, he said.

The area’s relatively balanced housing market, as well as an attractive interest rate, helped Matt and Jennifer Watson decide to buy their first home in March. Matt Watson, a 28-year-old manager of a Buffalo Wild Wings, said sales at the sports bar are up over a year ago, and he sees no indication of a letup.

He said he and his wife, who works for foodservice company Aramark, had no trepidation about taking out a mortgage on the $160,000 home.

“We’re confident in the jobs we have, so we don’t see our incomes falling,” he said. “Some people wonder if this is a good time to buy. We think so.”

Copyright 2008 Associated Press. All rights reserved
 
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