Oil & Gas News

Houston’s long, tempestuous relationship with the oil and gas industry may prove to be an asset


By: Erica Grieder – Houston Chronicle – Once upon a time, Houston was a city that “loved not wisely, but too well,” when it came to oil and gas. The 1980s proved that with an epic oil bust that wiped out one in seven jobs in Houston, crashed the real estate market, and upended local banks.

Houston’s relationship with the industry has evolved since then as business and political leaders pushed to diversify the regional economy. As sectors such as health care, technology and commercial space exploration have grown, so has ambivalence to the oil and gas industry. Two more wrenching oil busts in just over five years added to that ambivalences, as have growing concerns about climate change.

But Houston is still “the energy capital of the world,” and, as this year’s Chronicle 100 made clear, the oil and gas industry still drives the regional economy. Local economists say the industry’s comeback, boosted by rapidly rising energy prices, helped the region regain all the jobs lost in the pandemic faster than expected. They also say that the concentration of oil and gas companies here will cushion some of the blow to the broader economy from $5 a gallon gasoline.

“I would say, depending on how you want to slice the numbers, somewhere in the ballpark of 40 percent of Houston’s economy is directly or indirectly related to oil and gas,” said Jesse Thompson, a research economist at the Federal Reserve Bank of Dallas’s Houston branch.

Still, the oil industry’s hold on Houston is not as great as it once was. The oil bust that lasted roughly from 2014-2016 reached the same scale as the 1980s version in terms of the loss of jobs and operating drilling rigs, but led to only a brief, mild recession in Houston, Thompson said.

And while to oil and gas sector has shrunk, the local economy has powered on. Even as oil and gas employment fell by nearly 50,000 jobs between 2014 and 2021, overall employment in the region grew by more than 160,000 jobs during that period, according to the Texas Workforce Commission.

“The fact that oil and gas is still a major driver is not the same thing as saying Houston’s economy hasn’t diversified,” Thompson said.

The need to diversify —- both inside and outside the energy industry — has gained new urgency in recent years as global warming is not only changing the climate, but also Houston’s relationship with oil and gas. In the climate debate, the industry is often portrayed as the villain and the solution as the quick elimination of fossil fuels — and the companies that produce them.

While the long-term future of oil and gas remains a worry for the local economy, political and business leaders also have viewed the industry’s presence here as a competitive advantage as the world makes a transition to cleaner energy. In many cases, the expertise developed by oil and gas companies over decades are transferable to low-carbon alternatives such as carbon capture and storage, hydrogen, and biofuels.

A group of Republican and conservative women have launched a nonprofit, Clean Skies Texas, which aims to advocate for climate action for both political and economic reasons. Many Republicans are reluctant to acknowledge climate change, or at least the potential for environmental catastrophe, but they risk alienating women and younger generations, explained Sarah Davis, an attorney and longtime state representative for West University Place who serves on the Clean Skies Texas board of directors.

“But more important,” Davis said, “Texas has an opportunity here to retain and expand our global leadership in energy and technology. It would be a shame to pass up that economic and moral leadership, and we don’t have to.”

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Houston certainly doesn’t want to. A consortium of companies, led by Exxon Mobil, is seeking to develop a $100 billion carbon capture and storage hub in the region. Sen. John Cornyn, R-Texas, is leading efforts in Congress to fund pipelines, storage and other infrastructure to support the development of a hydrogen industry. The Houston refiner Phillips 66 is expanding into batteries.

The recent surge in energy prices, which is squeezing both consumers and businesses, has put a new focus the role petroleum plays in the global economy and the difficulties ahead as a warming planet seeks alternatives. In other words, oil and gas is not going away any time soon.

“It’s fair to say that the experience of the last eight or ten months, globally, has made people be a lot more pragmatic about the likely pace of the energy transition,” said Thompson. “A lot of people just weren’t quite aware of how dependent our world is on these molecules.”

Houston, which historically depended on those molecules more than any other major city, never forgot.

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