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

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 diversity 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 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 changes 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 the 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.