The State of Houston: Go East Young Man

Houston economy adjusts as economic growth shifts from the upstream heavy west side to the downstream driven east side

Economics of Houston

For the past decade, high oil prices and the explosion of domestic drilling (mostly shale) have led to high times for the Energy Corridor of West Houston. Profits and employment levels boomed as oil prices consistently stayed far above what they are today. But with oil prices collapsing recently, this prosperity has contracted. As stated in a prior blog, and to much dismay of upstream producers, oil prices won’t be recovering anytime soon. Concrete and glass buildings, filled during the boom, will soon lose their glimmer as vacancies rise. But hope lies in the east, the old grimy Houston ship channel is starting to look more beautiful as downstream activities continue full steam ahead. Below, we'll see a comparison of West Houston & East Houston Companies.


Both BP and ConocoPhillips have significant operations in the West Houston Energy Corridor. As seen above their stocks prices have significantly decreased as oil has dropped to under $50 a barrel. But if we head to the east-side of the energy capital of the world, we find where the current prosperity lays. 

East Houston Contenders

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As seen above, Valero and Phillips 66, both players in the downstream refining markets of the Houston Ship Channel, are seeing significant share increases. Compared to state of the energy markets as a whole (as seen below), the East Houston Ship Channel is booming. 


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In a pound-for-pound boxing match the ship channel of East Houston is in full-boom mode as crude, refined products, and chemicals are brought in and shipped out. Here refiners and chemical plants continue to see strong profits and growth. The shale revolution has given the Gulf Coast downstream sector significant advantages over their international counterparts.

Space City's downstream refining profits are not rocket science. It boils down to two simple things:

1 | Cheap WTI Crude Oil

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Cheap WTI crude has given US refiners a distinct competitive edge by decreasing the primary feedstock cost of refineries. International refiners are having a hard time competing with low prices here in the US.

2 | Cheap US Natural Gas

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Cheap domestic natural gas prices lowers both the feedstock and fuel cost for chemical plants and refineries alike. In addition, cheap gas has kicked off the construction of billion dollar LNG plants. Natural gas is headed to large exports as this dip in prices continues.  


Tough times have hit some in Houston as production companies are laying off employees. But hope is far from lost as refining companies are seeing prosperous times ahead. To those looking for prosperity in Houston:

Go East.

Greg Melon