Houston is by far the largest city in the US without zoning. That means there is no central business district, no real "bedroom communities" therefore EVERYONE commutes miles to work. Bus and light rail are political boondoggles that don't have any real application except to line the pockets of political insiders. Houston is also dead flat with a water table only eight to ten feed below ground level. For that reason there are no basements here. If you dig too far below grade, you install pumps to keep your cellar bailed out . . . so subways are out of the question. Ground level transit really messes with private surface transport, and elevated railways? Well, we had ONE about fifty years ago that ran about three blocks. No, it didn't work either.
So, we're stuck in this sprawling city of 600 square miles with tremendous need for private commuter transit. We're the largest city in the South, but we spend hours of every day sitting in traffic converting fossil fuels into ozone. Overlay this with Houston's being the hub of the international oil and petrochemical industry. We're the canary in the coal mine when it comes to the boom-bust cycle of oil prices. In the past two weeks three major oil service companies have laid off 9,000 workers with more to follow. That's the cost of cheap oil - there's no way to support exploration and production on sub-$60 oil. (Current price as of this writing for WTI is $46.16) All of this cheap gas is paving the way to a serious rebound as supplies dry up and motor gasoline becomes scarce.
In the offshore market, the big, deepwater rigs have slipped below 80% "utilization rate" that marks the beginning of rigs being stacked (mothballed) when they cease to be profitable. You'll never see much over 90% utilization because there are still a good number of floating junkpiles that are maintained in the inventory for tax purposes but couldn't drill a posthole. A tumble below 80% represents a significant retreat in drilling offshore. What may be more telling is that day-rates for the super rigs offshore has fallen below a half-million dollars per day - and that's about break-even for operation, maintenance, and debt service on one of these mammoth machines. What does all this market activity mean?
Market pundits - at least those looking several months into the future - are predicting an upswing in crude prices by the end of the summer. We've probably reached the bottom of the market for motor gasoline, and we can expect a slow climb out of the cellar over the next few months as we approach the summer driving season and production of more costly oxygenated fuels for the warm season.
Some "Chicken Littles" are talking about $5 gas by next Christmas, but realistically - barring any major war - $3.50/gal gas is well within range by October. The winter price decline should take over by then and hold prices at that level or below for the next 15 months or so. Long term? Well, inflation will take a large toll at that point, so another 10% rise isn't out of the question before we get to the "summer" pricing of '16.
It's always a shock to discover that whatever benefits the economy in terms of low energy prices, ultimately hurts the economy as energy resources dry up due to the market responding to overproduction and the collapse of exploration for new resources.
So enjoy the sub-$2 gas while we can . . . it's going to be a long and rough road - particularly if crude prices remain at these unusual lows for more than another few months and the energy sector layoffs spread. Yet another good reason for the Elio's appearance in the marketplace - just when it's needed.