Houston's Pipelines of Prosperity

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Houston's Energized Economy

While the national economy has taken a turn for the worse, Houston, Texas, is reaping the benefits of record high oil prices, which are driving the city's economic boom.

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In addition, the city never attracted the level of speculation that jacked up home prices elsewhere, so the national real estate shakeout has had little effect. Also, the weak dollar has bolstered exports at the port here, the nation's second busiest.

Some business leaders in the Houston area worry whether energy prices are going too high, bringing unwanted political pressure and scrutiny. "The price of oil is probably getting too high to make things work as well as they could for the refining and chemical business," said Matthew T. Doyle, a banker and mayor of Texas City. At some point, the high prices could dampen demand, he worries.

It already has raised the cost of doing business. Anadarko Petroleum of Houston finds itself having to pay signing bonuses to remain competitive in the market for petroleum engineers, geologists and other skilled workers needed to find and extract oil and gas around the world.

"Our company is probably advantaged more by a more modest price environment," said James T. Hackett, chief executive of Anadarko, which operates in a dozen countries. "One advantage of higher prices is that you can afford to go to more remote areas of the world to find oil and gas. But you don't need $130-a-barrel oil to do that."

Despite the worries, high energy prices seem to be good for business, at least for now. The many exploration and engineering firms headquartered here have seen a surge in business, as high prices make deep-water drilling and other more expensive forms of exploration and extraction economically feasible. Local energy consultants are cutting deals across the globe to sell their expertise in assessing the potential of natural gas and oil reserves. The number of jobs in Houston tied to energy exploration has increased more than 15 percent in the past two years, according to the Institute for Regional Forecasting. Work on alternative energy sources, including wind and solar, also has increased.

Meanwhile, makers of energy-related products -- including pipeline parts, specialized boats that service drilling platforms, high-pressure drill bits and seismic instruments -- are experiencing an upturn in business that has led to an increase in manufacturing jobs in Houston.

A similar surge is evident in other places where the economy is closely linked to the oil and gas industries. Coastal areas of Louisiana, including St. Mary, Lafourche and Terrebonne parishes, are experiencing strong growth in wages and employment, even as the rest of the state feels the effects of the national economic downturn. "Some of this is Katrina rebuilding related," said Dek Terrell, director of Louisiana State University's Division of Economic Development. "But most of it is gas and oil."

In Wyoming, officials expect strong growth to continue for the foreseeable future, or as long as natural gas prices remain high. State revenues are running 15 percent ahead of projections. The biggest problems facing officials are an acute shortage of workers and a surge in home prices, which are propelling a sharp increase in Wyoming's inflation, now running well ahead of the national average.

"We're moving ahead full steam," said Buck McVeigh, administrator of the state's Economic Analysis Division. "With natural gas prices the way they are now, it is hard to say anything bad about the economy here."

Jimmy Hayley, chief executive of the Texas City-La Marque Chamber of Commerce, has a similar view. Just three years ago, things hit a major snag as hurricanes Rita and Katrina damaged oil platforms in the Gulf of Mexico. Also, a 2005 explosion at the huge BP refinery in Texas City killed 15 people and injured 180, making it the nation's worst industrial accident in more than a decade. But since then, oil and gas prices have soared, and the oil and petrochemical companies have spent billions to upgrade their plants and restore their drilling platforms.

That spending is evident in Texas City and La Marque, in newly renovated office space at previously wheezing strip malls and in the new waterfront subdivisions within a few miles of the refineries and petrochemical plants. After rejecting a big bond issue several years ago, voters recently passed a $122 million issue to build and renovate schools in Texas City.

"The workers inside those gates make good money," Hayley said, as he pointed toward the huge row of oil refineries on the horizon. "That makes them more willing to spend on other things."