Economic Lifeblood Fails City : Oil Price Drop Devastates Already Battered Houston

Rose Teixeira knew the game was up when not even lovers cared enough to give.

On Valentine’s Day this year, she and her husband, Bernie, locked the doors of their gift shop in mid-afternoon. There was no reason to stay open; not even the cards were selling well, much less the baubles.

The year before, sales had been so brisk that they had been busy well into the evening.

Next month, the Teixeiras will close their shop, All Ways Gifts, for good, liquidating their stock and getting out while they can.

They are not alone. A study by the Houston Chamber of Commerce estimates that 108 small businesses are folding up daily in this city, with no end in sight. Last month, 898 of those businesses filed for bankruptcy.

As Rose Teixeira saw it, All Ways Gifts was selling just enough to pay rent and taxes--so why bother?

“People do not have the money,” she said. “And the people who do have money come in and say they are scared, that they want to hold on to what they have because they do not know what will happen next.”

The problem here is oil--for decades Houston’s lifeblood and, now, its source of misery. After the bust of 1982, when oil prices did an about-face, Houston tightened its belt each year, waiting for the resurgence of the economy and an increase in demand for oil.

Then, four months ago, disaster struck. The price per barrel of oil, Houston’s barometer of prosperity, took a precipitous drop that has cut it by half. Down, too, came the other hallowed barometer, the count of offshore oil rigs--down to its lowest point in 13 years.

Sense of Power Fades

Now, Houston, the energy capital of the world, the nation’s fourth-largest city, is facing a crisis as black as the oil that once made it the mecca of the free-wheeling entrepreneur.

When oil was costly and gasoline lines were long, bumper stickers here snidely proclaimed, “Drive 90, Freeze a Yankee.” Little of that sense of power remains today; instead there is a feeling of helpless desperation. News of layoffs and closings has become the daily fodder of the local press.

“I think there’s a good shot that Houston could lose 100,000 jobs this year,” says local economist Barton Smith. “If you work at a McDonald’s or a cleaners, you are dependent on the energy sector for your existence. We’re all in the same kettle.”

But it is the toppling energy domino that sends the others falling all along the line. In mid-March, when the Tenneco Corp. fired or imposed early retirement on 235 of its Houston workers, it had taxis waiting outside the building to drive the former employees to their homes. Other companies have been less considerate, but thousands of workers in the energy industry, many of them in the white-collar category, are leaving their offices for the last time.

Unemployment Rivaling Peak

Richard Rice, with the regional office of the Texas Employment Commission, said unemployment claims were being filed at a record pace, rivaled only by the figures for 1983, the peak of Houston’s first major bust, when 150,000 people lost their jobs.

“It looks like a lot of oil-related companies were just hanging on and, with this drop, a lot are just giving up,” he said.

John Blocker, the president of Blocker Energy Co., said the major question people in the oil business are asking is: After all those years of cutbacks, of waiting for the rebound, what else can be trimmed just to survive the “last karate chop?”

“We’ve been going steadily down since 1982, but the coup de grace was the price drop. It brought our industry to a calamitous state,” he said. “I don’t have any friends in any business that haven’t been hurt. My dentist says his business is down 30%. A year ago, you couldn’t get an appointment.

“A lot of these people losing their jobs are in their late 40s and early 50s and it’s too late to retrain,” he said. “Most of them don’t know what the hell to do. I tell them the best thing to do is to get the hell out of here.”

No Reply to Resumes

Blocker will probably survive; he has cut back his payroll from a high of 240 to the present 37 and diversified his business overseas, where there is still a market for drilling.

But others are not so lucky. Quenten Stanley, who was a sales director for Regal International--a manufacturer of rubber products for drilling--was laid off on New Year’s Day. So far, he has sent out 130 resumes throughout the country without receiving a single promising reply.

With his house payments, his son’s college tuition, his wife’s office rent--her business is real estate, hardly a lucrative field these days--Stanley is now dipping into savings to cover $4,000 a month in fixed costs. He said he will go almost anywhere and is willing to take less than the $55,000 a year he made at Regal.

“It adds up in a hurry,” he said of his bills. “It can’t last, not a whole lot longer.” Stanley, who has been in the oil business for 27 years, many of them in foreign postings, said: “When you’ve had a darn good job, with all the perks, and then you go to zilch overnight, it’s an eye-opener.

“The sad thing about being unemployed is that it’s getting to be a larger fraternity every day. It’s like a snowball going downhill.”

How long can he survive?

“It all depends on how many houses my wife can sell,” he said.

‘We’re Poor Now?’

Jim Sanders, who was a senior systems analyst at Cameron Iron Works before being laid off Feb. 24, said he never thought of himself as expendable. “I felt I would be the one to lock the door when the building closed,” he said.

Sanders’ 14-year-old son, Mike, had only one question when his father broke the news: “Well, we’re poor now, huh?”

Houston’s biggest economic problem may be that it has so far to go just to get even. Mayor Kathy Whitmire stresses the city’s economic diversity, saying that it is moving away from being a one-industry city in which eight of 10 jobs are directly related to the energy sector. But developing that diversity will take time, and a recent study by the University of Houston Center for Public Policy put Houston’s dilemma in dreary perspective.

“To get Houston’s economic base back to its 1981 level would require a remarkable feat without a recovery of energy-based employment,” the study said. “The city would have to attract 10 new GM Saturn plants, 10 new Navy ports, 10 new computer firms, a completely new medical center solely devoted to out-of-town patients and a second space center at least as big as the Johnson Space Center.”

That news was bad enough--but the study was prepared before the price of oil began to plummet.

Economist Smith, who compiled the report, now envisions double-digit unemployment for Houston, and the prediction is already near reality. February unemployment figures jumped from 7.4% to 9.6%.

No Quick Fix Predicted

Bernard Weinstein of the Center for Enterprise at Southern Methodist University in Dallas said there is no such thing as a quick fix for Houston or the oil industry in general and that in Texas “the oil tail still wags the dog.”

“I guess the ultimate question is: is Houston sick or dead?” he said. “The answer is sick. Houston is in the middle of a wrenching transformation but Houston will be here 10 years from now. Houston will continue to be the energy capital of the world.”

The sick Houston of today, though, is more bedridden than ambulatory. This year the city itself may come up as much as $72 million short of what is needed to maintain city services. Social service agencies are swamped with requests for help. The consumer credit counseling service is advising 28% more people this year than for the same period in 1985 on how to get out from under a sea of unpaid bills. Many of those people have been using credit cards to keep their finances afloat.

“Many people are earning less money than they used to but have the same expenses, so they’re tempted to use that credit card to bridge the gap between income and living standard,” said Terry Blaney, president of the counseling service.

Some Just Walk Away

Louise Rochford, a director at one of the counseling offices, said she encountered one family recently that had been living entirely on credit cards and was $36,000 in debt. That was not an unusual case, she added, and many people have as many as 10 credit cards to spread the debt around.

“We’re seeing a lot of people just walking away from their homes and other debts,” she said. “I think we’re in for a mass exodus this summer. All the people who came here to find work in the good times will be leaving town.”

Other indicators are equally bad. The classified ads are filled with listings of foreclosed homes that are being sold at auction. Houston’s already vast inventory of vacant office space continues to increase, and 38% of the city’s commercial space is empty. The vacancy rate for Houston’s small shopping centers, which are feeling the greatest pressure as businesses fail, is now 49%.

All of this is taking its toll on those who were waiting, anxiously, for the recovery to begin.

Gerald Slaton, a psychotherapist who frequently consults with small- and medium-sized businesses, said Houston is in a “reactive depression.”

Baby Boomers Hit Hard

“I see people every day who have become self-deprecatory,” he said. “They berate themselves and say, ‘We should have seen this coming. We should have diversified.’

“In a way, the people hardest hit are the baby boomers, people in their late 20s through late 30s. They’re experiencing a lot of confusion and disorientation about goals. For years, Houston fulfilled every boomer’s fantasy. It was the baby boomer’s Oz. Now they have to adjust their expectations. They have to grow up at last.”

Houston, being Houston, is still trying to maintain a can-do exterior in these times of trouble. Mayor Whitmire says there is no choice now but to move forward.

“Being nervous doesn’t do any good,” she said. “I don’t think it will do anyone any good to sit around and wait for the price of oil to go up.”

And Smith, the economist, said that while this latest drop may cost jobs, it will accelerate the honing of businesses down to muscle and bone, especially in the oil industry, which he said had been a “real fat cat.”

“It’s a last shake-out and we’re getting it over with,” he said.

Making a New Start

That may be true enough, but it is hardly reassuring to the likes of Clyde Barlow, who was laid off from the Reed Tool Co. on Feb. 7. Barlow is 57 years old and must now try to make a new start. His wife is looking for work as well.

Barlow made more than $50,000 a year before the company let him go and now, like Quenten Stanley, he is sending his resumes throughout the country. He knows, though, that age is working against him.

“It’s not a problem--except in the minds of people you talk to,” he said. “They would prefer to have younger people.”

Times researcher Joanne Harrison contributed to this story.