Houston Reclaims Title as Energy Capital

Trade boom, oil price surge to benefit local economy, report says

Sixty miles from shore in the Gulf of Mexico huge supertankers from West Africa and the Middle East laden with tons of crude oil drop anchor. Too big to come all the way into a Gulf coast port, they must discharge their oil cargo to shuttle tankers which will transport it to shore. In a carefully orchestrated lightering operation, giant hoses transfer up to 500,000 barrels of crude oil onto the shuttles for transport to area refinery terminals. Smaller tankers, several per day, are able to enter the ship channel directly to discharge crude at places such as the Exxon plant in Baytown, or other terminals near Deer Park, Galena Park and Pasadena. Thus continues the complex system of operations which works to satisfy America's thirst for petroleum products.

Houston and the Gulf Coast region have 40% of the nation's petrochemical manufacturing capacity. The area is a pivotal link in supplying the rest of the country with vital energy resources such as gasoline and other petroleum products. Almost half of Houston's industry is oil-related, and with a surge in the price of oil the Houston economy is predicted to expand by four percent this year. According to Kiplinger's Personal Finance magazine, Houston has reclaimed its title as the U.S. energy capital, and ranks as number one on its Best Cities of 2008 list.

Eighty percent of the imports into Houston are petroleum-related with a large percentage of that being crude oil. Most of the crude will be refined into gasoline to fill the tanker trucks and pipelines to fuel automobiles and various other equipment.

Houston's trade boom is due to the country's dependence on foreign oil. The U.S. imports about 60% of the oil that it consumes. The Energy Information Administration projects that crude oil imports will hold fairly steady in the next two decades. By then, it says, oil production increases in the Gulf of Mexico and elsewhere, combined with biofuel and coal-to-liquids production, will eliminate the need for imports over the longer term. The EIA predicts import dependence will drop to 54% by the year 2030. This means petroleum imports will continue to impact Houston's economy for the foreseeable future.

Most of the crude oil coming into the Port of Houston originates in Mexico, Nigeria, the Persian Gulf, and Venezuela. A lag in oil production in these countries for various reasons raises the price of oil as demand increases. Asian countries such as China have increasing demands for oil as they become more industrialized. The Saudis claim they are not able to meet the increased demands for oil until their production capabilities are expanded. Other OPEC countries like Venezuela and Nigeria are subject to political conflicts which threaten seizures and attacks on oil facilities. Mexico's Pemex reports crude production will be below target all year due to problems in one of its large oilfields. Even if these countries increase their output of oil, speculators and the falling U.S. dollar will continue to keep prices of crude oil high.

The cost of foreign crude oil is not the only factor that affects the retail price of gasoline. As one of the main products refined from crude, gasoline is delivered from refineries like those along the Houston Ship Channel through pipelines to massive distribution terminals and then to trucks serving individual retail stations throughout the U.S. The cost to oil companies to deliver this gasoline includes federal and state taxes, the cost of refining, distribution and marketing expenses. The price paid by consumers at the pump reflects those costs, plus the profits or losses of refiners, marketers, distributors and retail station owners.

Houston is certainly a major player in the processing and marketing of oil. There are more than 3000 energy related companies, nearly 600 exploration and production firms, and 170 pipeline operators in the Houston area. Many are located in office buildings along I-10 West in what has become known as the "Energy Corridor." These companies have generated jobs and tax revenue for Houston as well as the State. Houston is in a better position economically not only because of its oil industries, but also because it has a diversified economy which includes aerospace, technology and large medical centers. As long as there are tankers loaded with oil, and consumers for the oil, Houston will be working to keep it flowing.