Houston’s relationship with energy industries and Port of Houston has kept us relatively protected from the painful recession that has firmly gripped our nation.
As oil prices drop and demand remains low, investment, production and drilling have slowed. This drop in business will be felt by numerous energy and oil firms in Houston, as they scale back due to reduced business and incentive to drill.
In a question and answer session published in the Houston Chronicle on August 1, L.M. Sixel reports the statements of some of the Houston area’s leading energy gurus and economists.
When asked how the Houston economy stacks up compared to the rest of the nation, the response was mixed. Dana Johnson, chief economist of Comerica Bank, isn’t as optimistic as others about Houston’s forecast.
‘During the past six months, Houston’s economy is no longer outperforming the nation,’ Johnson said.
Johnson sees economic prosperity in Houston’s future in relation to exports as the economy rebounds, but is not as positive in terms of our energy leaders.
‘Global trading has been slammed and the energy market isn’t doing as well,’ Johnson said. ‘Natural gas prices have declined so far and aren’t likely to recover, which means drilling activity will remain fairly subdued this year and next.’
Marcela Donadio, oil and gas leader for the Ernst & Young Energy Center in Houston, feels Houston’s energy leaders have handled the price volatility well.
‘Even though crude prices in the last year fell from $145 a barrel to $30 a barrel, Houston hasn’t seen the ‘slash-and-burn’ type of adjustments that were used in downturns during past decades when companies aggressively pared their payrolls,’ Donadio said.
Donadio’s brighter outlook is largely because of energy companies’ measured response to the recession.
‘While energy companies in general have been downsizing and adjusting their capital budgets, they’re also trying very hard to retain staff and continue their capital spending programs. That long-term outlook is helping the city of Houston,’ Donadio said.
David Santana, president of the Greater Heights Area Chamber of Commerce, predicts Houston will rebound faster than most because of our strengths that kept us protected at the start of the recession.
‘Houston will rebound faster, largely because real estate never reached the overinflated levels of Florida, Nevada or California,’ Santana said.
Paul Bettencourt, president and corporate executive officer of Bettencourt Tax Advisors, is keeping an eye on local spending, namely ‘two to three months of rising sales tax revenues. It’s the best governmental indicator I know,’ Bettencourt told the Chronicle.
As a whole, the Houston economy has toughed out one of the worst recessions in history. Our challenges should bring more opportunities for the future.
Andrew Taylor is an economics junior and may be reached at [email protected]
