Houston is feeling energized

Times Staff Writer

FINE wine flows freely at Tony’s, the dining room of the rich and powerful in this dynamic Sun Belt city. But it always flows a little faster when the price of crude oil is high -- and these days, owner Tony Vallone said, the bottles are emptying at a brisk pace.

On a recent Friday evening, socialites in fur coats stepped past the cascading sheets of water at the glass entrance, into an airy room adorned with vibrant Robert Rauschenberg paintings. Waiters wheeled out enormous souffles and whole red snappers encrusted in salt. The richest man in town, oil pipeline magnate Dan Duncan, was dining there for the third time in four days.

At the center table, Ileana Trevino, the head of a hospital foundation, was celebrating her 51st birthday with about a dozen close friends and her husband, Michael, a Marathon Oil executive. She was asked what she wanted to drink.

“Whatever’s expensive,” Trevino replied, and laughed. The sommelier recommended bottles of a $50 red from Spain’s Montsant region, a modest option at a restaurant that offers magnums of 1945 Chateau Petrus Bordeaux for $30,000.


“It’s almost palpable, isn’t it?” said attorney Michael Solar, one of Trevino’s friends, as he waved his glass to indicate the wealth in the packed room. “When the rest of the country is doing well, it seems like Houston is often struggling. But when the rest of the country is struggling, it seems like Houston is often doing well.”

High oil, natural gas and electricity prices may bring pain to families and business owners elsewhere, but in America’s energy capital, they bring prosperity.

Two out of every five Houstonians owe their jobs to energy -- many big oil and gas companies have their world or American headquarters in Houston -- and the industry’s spectacular profits in recent years have helped the nation’s fourth-largest city outdistance the country as a whole in economic growth.

Los Angeles and most big cities are seeing slowdowns in their real estate markets this year, but Houston’s is still climbing: For 34 months straight, area home sales have increased compared with the same month a year earlier. Yet Houston’s housing remains surprisingly affordable: The median home sales price in November was $147,000, compared with $487,000 for the Los Angeles region.

The city is on pace to add 75,000 jobs this year, an increase of about 3.5%, or more than twice the national average. Though that growth rate falls short of Las Vegas and a few other large American cities, experts say it is remarkable that Houston’s economy continued to expand even after one of its largest white-collar employers, Enron Corp., collapsed from a financial scandal and declared bankruptcy in 2001.

“A petroleum engineer coming out of Texas A&M; now gets about $87,000 a year and a $30,000 signing bonus, and that’s for someone with no experience,” said Robert W. Gilmer, a senior economist for the Federal Reserve Bank of Dallas. “Houston has heated up to the point where it spreads all the way through the employment sector, to plant operators and truck drivers.”

Halliburton Co., the construction and oil field services firm that landed numerous federal contracts to rebuild Iraq, has a checkered reputation in parts of the world. But it has added 11,000 jobs this year, and in Houston, where it is headquartered, it was recently selected as one of the best companies to work at by a leading business journal.

“There is definitely a feeling of excitement working in the energy industry in Houston at this time,” said Renee LeBas, who moved here this year to work at Halliburton, where she helps companies find solutions to oil field problems.


LeBas, a petroleum engineering graduate from the University of Texas at Austin, recently bought a small house in a desirable suburban neighborhood, just inside the ring of freeways that circles the city. It’s the 28-year-old’s second real estate purchase since college.


FOR all the people doing well in Houston, however, there are still many not benefiting from the improved economy, particularly those without college educations. Houston’s unemployment rate continues to be slightly higher than the national average, and the presence of tens of thousands of Hurricane Katrina evacuees threatens to become a major social problem when government housing assistance to the storm survivors runs out.

“Not everyone in Houston is going like gangbusters,” said Stephen L. Klineberg, a Rice University sociologist who has been surveying the attitudes of Houstonians for a quarter-century. “A relatively small number of people are making a lot of money, but there are still plenty of people struggling to get by.”


What’s more, many of those prospering are greeting the good times with a grizzled skepticism.

Houston’s economy is much more diverse than it was two decades ago, when roughly 80% of all jobs were tied to energy; the city now has a thriving port and a rapidly expanding medical district known for some of the best specialized care in the South. Still, veterans of Houston’s boom-and-bust energy economy are mindful that fortunes could turn quickly, like they did in the 1980s, when a sudden swoon in crude oil prices sent the city’s economy crashing.

“This industry is known for being a roller coaster, and right now, with oil over $60 a barrel, they can’t find enough people for all the work they’ve got,” said engineer Glenn Woltman, 55, who recently left a federal job in New Orleans to take a position paying “well into the six figures” here with Superior Energy Services Inc. “This is about as good as I have seen it. I was considering five different offers.”

But the 33-year petroleum engineer, who lost his job with Marathon Oil during a downsizing two decades ago, is chastened by experience.


“I’m packing away as much as I can, because I do know that oil runs dry,” said Woltman, whose job is to evaluate “missed opportunities” at a Gulf Coast oil field that was already tapped by BP. “I have been through those bad cycles.”

Houston’s economic boom is tied not only to short-term spikes in energy prices, but to forecasts for global energy demand that are leading many companies to make ambitious long-term bets. Amid expectations that the skyrocketing needs of China and India will only increase, firms are more willing to explore for oil and gas in places previously considered too expensive, or to slog through red tape to build refineries and power plants.

Headhunters in Houston are going after all the engineers with 10 to 15 years’ experience they can find. Companies are paying salaries $10,000 to $15,000 higher than just 18 months ago, and are sweetening the pot with retention bonuses, stock options and other perks reminiscent of last decade’s dot-com boom.

Some firms are even luring engineers out of retirement by offering them more than they made during their prime earning years. Hagan Joyner, 74, got a call from a headhunter at Collarini Energy Staffing, offering a six-month gig. The veteran reservoir engineer, who worked 39 years before retiring in 1999, turned it down. But his wife, overhearing the conversation, told him he’d be crazy if he didn’t call back.


He took a less stressful job minutes from his house, helping oil companies report their reserves to banks and the Securities and Exchange Commission -- for $85 an hour.

“I didn’t think I’d see something like this again in my lifetime,” said Joyner, who is planning to use his windfall to see more of the world with his family. “The pay is certainly more than I used to make when I was working full time. We’re getting our house fixed up, and are doing some things for our grandchildren.”


HOUSTON, like other Sun Belt cities, remains relatively affordable. Its cost of living is 24% less than other metro regions of 2 million or more people, according to the Council for Community and Economic Research, a national group that compares basic costs such as housing, groceries and utility bills.


So after paying their bills, many still have money to spend.

Those benefiting most from the current energy boom are behaving demurely compared with past generations of Houstonians, who giddily spent small fortunes on jewelry, 12-cylinder Jaguar sedans and lizard-skin cowboy boots when oil prices were high, only to sulk in shame when they bottomed out. A bumper sticker popular in Houston’s sober aftermath read, “Please Lord, give me one more oil boom. I promise not to blow it next time.”

But after years of modest consumption, the money has begun to flow, especially at the city’s more luxurious establishments.

“It’s human nature -- when people have more discretionary income, they are more willing to spend,” said Evelyn Gorman, owner of Mix: Modern Clothes, an industrial-chic boutique that sells Bruno Frisoni shoes, Balenciaga handbags and other high-priced fashions. Mix, which recently moved into a boxy new building that looks like a Gulf Coast oil platform, has enjoyed steadily increasing sales over the last two years.


“Would I want to be in Louisiana or Detroit right now? Absolutely not. In Houston, Texas, energy capital U.S.A., when the price of oil is high, you can certainly tell the difference,” Gorman said.

The city’s elite spas and social clubs all have waiting lists, said Colleen Kennedy, director of memberships at the Houstonian Club, where the first President Bush goes for his haircuts and former First Lady Barbara Bush takes brisk walks.

“That is the first time in all my years in this business that I have seen that,” said Kennedy, who has been with the Houstonian for a quarter-century. “All of these clubs are high-dollar items. Our membership fees are $20,000 and $24,000.”

In the Texas Hill Country, the picturesque region of rugged, rolling landscapes at the center of the state, Houstonians buying vacation and retirement homes have helped send real estate prices surging.


“I’m astounded at these prices. I used to think these people must be dope dealers or something, but I know better now,” said Pat Boyle, owner of Pat Boyle Realty, who has been selling ranches in Bandera County since 1978. Among the properties was a 31-acre hilltop retreat with an orchard and swimming pool for $1.6 million -- a large sum in a state where the median home price is $142,000.

“Oil and gas is still the engine that pulls the train, but it seems like the whole Texas economy’s rocking and rolling. All these people in their glass cubicles in Houston want their little piece of the Hill Country,” Boyle said.

Like Texans in general, Houstonians love to drive gas-guzzling pickups and sport utility vehicles, which remain a common sight here despite the surge in prices at the pump. In the upscale Galleria shopping district, Texas-sized compact parking spots can fit a tank -- and are frequently filled with the urban equivalent, a gleaming new Hummer.

“A lot of people have figured out how to make a lot of money in this town, and God bless them,” said Mike Shafer, sales manager for the McGinnis Hummer dealership. He estimated he sells 40 Hummers a month, up from 25 a year ago. The outsized status symbols range from $29,000 to $53,000. “Gas goes up, gas goes down, but that never really affects sales here,” he said.


Houstonians also love going out to eat -- and they do so more than big-city dwellers anywhere else in the country. The Zagat Survey this year found that Houston residents dined at restaurants 4.2 times a week, compared with 3.4 times for New Yorkers and 3.2 times for Americans overall.

During the peak of the petroleum boom that showered Houston with riches a quarter of a century ago, Tony’s would sometimes sell white truffles to a cadre of society queens and oilmen, said Vallone, a gracious man whose pudgy cheeks and thick torso betray years of la dolce vita.

Now, Vallone said, it is not unusual for Tony’s to sell three dozen orders of white truffles on a Saturday night. The patrons who pay $125 for the privilege of having the aromatic delicacy shaved onto their plates of pasta and risotto are not all tycoons -- many are young professionals with money to burn.

“In the old days, young people would come here for a special occasion, a birthday or an anniversary,” said Vallone’s wife, Donna. “Now they come here to dine.”