Houston is the fastest growing major metropolitan area in the U.S. in terms of payroll job creation, up 3.4 percent on a year-to-year basis this June. As the center of the global petroleum industry, Houston has benefitted from sustained high global oil prices and from the worldwide boom in natural gas exploration. Global oil demand forecasts have been dialed down due to weak macroeconomic conditions in Europe, Asia and the U.S., but prices remain well above the minimums required to sustain a vital oil industry. The NYMEX price for WTI crude has climbed since mid-summer to $90-$95/barrel and Brent crude, the marker for international oil prices, has climbed to above $110/barrel. Natural gas prices in the U.S. are depressed from a rapidly increasing supply, now far below the $12.69/MMBTU (Henry Hub price) spike of June 2008, down to a low of $1.95 for this past April. Since late April, natural gas prices have increased to near $3.00/MMBTU as of early August.
As a result of low natural gas prices there has been a tailing off of exploration activity since late 2011. The U.S. rotary rig count for natural has projects has declined from 936 in early October 2011, to 498 by early August, 2012. Where natural gas reservoirs produce petroleum fluids (wet gas), high liquid petroleum prices may still support ongoing reservoir development. Recent drought condition across much of the U.S. may limit the available water supply in some areas for drilling and hydraulic fracturing.
Houston is still attracting new energy-related industry, but a critical component of the metro area’s long-term economic outlook will be its ability to grow non-energy-related industries, which will provide economic vitality and stability when energy markets are weak. A rapidly expanding population with strong income growth will foster gains in the non-energy sector. House prices have been firming through mid-year 2012, and are expected to continue to gain as home sales increase.
Click here for the complete 2012Q3 Houston Regional Economic Update: Houston2012Q3.