Oil profits help Houston boom

Marketplace Staff Dec 26, 2008

Oil profits help Houston boom

Marketplace Staff Dec 26, 2008


Tess Vigeland: From one temperature extreme to another, remember way back, oh, six months ago when energy prices ballooned? Well, so did the oil city of Houston, TX. And even though gas has come down from its stratospheric levels, the city still boasts low unemployment, and is projecting steady job growth for years to come. But as Kate Archer Kent of Red River Radio tells us, an oil-rich economy isn’t an automatic pipeline to prosperity.

Kate Archer Kent: Hundreds of wealthy Houstonians recently toured a multimillion-dollar show home in a development going up 35 minutes from downtown. When they’re finished, these waterfront estates will be able to accommodate 70-foot yachts in their backyards.

Developer David Goswick isn’t phased about selling luxury homes in a down economy. He says Houston is brimming with potential buyers.

David Goswick: The oil industry, oil executives, and cardiologists, plastic surgeons, researchers from the Texas Medical Center, are really the primary audience.

On the other side of town, the food bank is trying to keep pace with the city’s growing hunger pangs.

Brian Greene is CEO of the Houston Food Bank. When he drills down into U.S. Census data, he finds that 35,000 people will go hungry in Houston today. That’s 3,000 more than two years ago.

Brian Greene: Our poverty rate has actually been increasing. Because of all the opportunity, we have a very large migration flow here of people who have not been successful where they were.

Those people are meeting with mixed success in Houston. Some are finding work and contributing to the city’s economy, and others are draining it, says Stephen Klineberg. He’s a sociologist at Rice University. He’s studied the city’s ethnic makeup for 25 years. Klineberg says Houston is a microcosm of America.

Stephen Klineberg: What is happening in Houston, as in America, is a growing gap between rich and poor. Houston has the greatest medical complex on the face of this planet, and the highest percentage of children without health insurance of any major city in the country. So you’ve got both great mansions forming and longer lines at the Houston Food Bank.

Brian Greene does a lap of his massive food bank warehouse. He ducks into refrigeration rooms filled with everything from a botched order of bulk purple onions to stacks of bright green overstocked melons. Greene says oil money is keeping his food bank topped up.

Greene: Houston is a fortunate place to be. If it wasn’t for the increase in local donations, we would have gone down this year like most food banks did.

Those donations come from a swelling population of high-wage professionals. The city will add more than 50,000 jobs this year, says Michelle Mitchell, the city’s finance director. She says new arrivals who have jobs boost Houston’s tax revenue. That allows the city to add services and lower property taxes.

Michelle Mitchell: It’s an exciting time to be finance director. I mean, we have all the oil companies here so clearly we’re the oil capital of the world. I mean, everyone in the world knows that. Go to Houston if you’re going to talk oil.

But Mitchell says Houston isn’t all about oil. One reason why it’s getting ahead, she says, is because it diversified away from the oil and gas industry. Rice University’s Klineberg says it’s a sharp contrast to the last Houston boom 40 years ago.

Klineberg: When the rest of you guys were having your stagflating 70’s and your Carter malaise, Houston was booming because 82 percent of all the primary sector jobs were tied into the oil business. Houston is now much more diversified in its economy. It is locked into the national economy.

Waterfront home developer David Goswick hopes that Houston isn’t too locked in. With the nationwide housing market still on its knees, he’s hoping to sell homes that start at $1 million, which he says is pretty cheap.

Goswick: Right now, in today’s conditions, I don’t know of anywhere in America where homes of this quality are being built on the water.

Fortunately for Goswick, Houston is still the oil capital of the world. Whatever happens to the wider economy, the city will continue to boom, as global demand for oil continues to grow. Goswick expects as many as 10,000 people will tour his show homes when they’re finished in the spring.

In Houston, I’m Kate Archer Kent for Marketplace Money.

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