Houston's Oil Empire

On January 10, 1901, a well on a low hill south of Beaumont roared, and a column of oil rose more than 100 feet into the air, higher than its derrick. Read more A local businessman, Pattillo Higgins, had insisted for years that oil lay beneath this hill, and many in town thought him something of a fool. The engineer Anthony Lucas agreed with him, and the Hamill brothers drilled the well.

The hill is a salt dome. Rising salt had bent the rock above it upward, and oil, seeping up through porous stone, was trapped beneath a seal it could not cross. The gusher ran for nine days, by most estimates near 100,000 barrels a day. Within two years, the companies that became Gulf and Texaco were refining at nearby Port Arthur. Remember the salt dome. It returns later in the story.

North of Houston, the town of Humble has grown into the suburbs. Oil was found here in 1904, and in 1905 the field produced more than any other in Texas. Among the men who came was Ross Sterling. Read more In 1911, with partners, he chartered the Humble Oil Company.

Texas had driven the Standard Oil trust's affiliate out of the state, which left room for local independents. An independent often does one thing: find and produce oil. The giants, called majors, are integrated. They work upstream, finding and pumping oil. Midstream, moving and storing it. And downstream, refining and selling it.

Humble wanted all three. In 1919 it sold half of itself to Standard Oil of New Jersey to pay for a refinery. Jersey Standard later took nearly all of it, and in 1973, Humble became Exxon. Ross Sterling became governor of Texas.

In Houston's East End, an Art Deco office building on Polk Street once headed a company that changed how wells are drilled. Read more In 1909, a Houston oilman named Howard Hughes patented a drill bit with rolling cones of steel teeth that ground through hard rock instead of scraping at it. Hughes did not sell his bits. He leased them, and kept the title. The profits later carried his son, Howard Hughes Jr., into films, aircraft and an airline.

This is the service side of oil: in a gold rush, sell the picks and shovels. In 1944, Hughes Tool began a weekly count of working drilling rigs. Under the name Baker Hughes, that count is still watched every week as a pulse of the industry. Halliburton, one of today's service giants, is headquartered in Houston.

Here Buffalo Bayou widens into a basin where ships can turn around, about 50 miles from the open Gulf. Houston was an inland city that wanted to be a port. Read more It offered to pay half the cost of dredging a deep channel, and Congress agreed. On November 10, 1914, President Woodrow Wilson, in his office in Washington, fired a cannon here by remote control. The mayor's daughter scattered roses and declared: "I christen thee Port of Houston; hither the boats of all nations may come and receive hearty welcome."

Refineries followed the water, because crude arrives most cheaply by tanker and barge, and gasoline leaves the same way. By 1930, nine refineries lined the channel. Today the Port of Houston handles more cargo by weight than any other port in the nation. Downstream, the largest refinery of its day was already running.

Where the Ship Channel meets Galveston Bay sprawls one of the largest refineries in the United States. Humble began building it in 1919, with Standard's money, and in May 1920 the first oil went into a still. Read more

Refining begins with a tall tower. Crude is heated until much of it turns to vapor, and the vapor rises. Each part condenses at its own temperature, and so at its own height. Gases at the very top. Then gasoline, then kerosene and jet fuel, then diesel. At the bottom, a heavy residue that becomes fuel oil and asphalt. Next comes cracking: heat, pressure and catalysts break heavy molecules into lighter ones, so each barrel yields more gasoline.

A refiner earns the difference between the price of crude and the price of what it makes. The trade calls it the crack spread. By 1940, Baytown was the largest refinery in the country.

On Main Street in downtown Houston, an Art Deco tower of 36 stories still rises above the newer glass. When it opened in 1929, it was the Gulf Building, and for 34 years nothing in Houston stood taller. Read more It was built by Jesse Jones, a lumberman turned developer and banker. His National Bank of Commerce took the vaulted banking hall. Gulf Oil, born at Spindletop, leased 13 floors above it.

That arrangement tells the story of the city. Oil money flowed into Houston's banks, and the banks lent it out again to build offices, hotels and a skyline. Jones went on to Washington. From 1933, he ran the Reconstruction Finance Corporation, the federal government's great lender of the Depression, and through the Second World War he still controlled it. Houston would feel his reach again when the war came.

The tour leaves the coast for the pine country of East Texas, because here Houston's oil companies learned a hard lesson. Read more In October 1930, a 70-year-old promoter called Dad Joiner struck oil near Henderson, on his third attempt. It opened the largest oil field in the lower 48 states. Thousands rushed in, and drillers pumped as fast as they could. Downtown Kilgore became a forest of derricks.

By the summer of 1931, oil sold for as little as 13 cents a barrel. Governor Ross Sterling, a founder of Humble Oil, proclaimed the oil counties in "a state of insurrection, tumult, riot, and a breach of the peace." Troops shut every well. Afterward, the Railroad Commission set limits on how much each well could pump. Too much oil, it turned out, was as ruinous as too little. When OPEC was organized, the Texas commission was its model.

In the first months of 1942, German submarines hunted along the Atlantic and Gulf coasts. Between January and April, they sank 46 tankers. The answer was to move oil overland. Read more That summer, crews began laying a pipe 24 inches across, the Big Inch, from a pumping station here in Longview toward Pennsylvania, at up to nine miles a day. A twin, the Little Big Inch, carried gasoline and other fuels from Baytown to New Jersey. The Reconstruction Finance Corporation, the federal lender Jesse Jones controlled, paid for both.

This is the midstream. Pipelines move enormous volumes steadily, cheaply and out of sight. Before victory in Europe, these two lines carried more than 350 million barrels. After the war they were sold and refitted to carry natural gas east, and helped build a national market for it.

Along the Ship Channel east of Houston, refinery towers and chemical plants stretch for miles. Shell opened its Deer Park refinery here in 1929. In the Second World War, the channel became an arsenal. Read more Shell's plant alone made 10 million gallons a year of toluene, for TNT. At Baytown, Humble made high-octane aviation fuel, and a government plant there produced nearly half the toluene the nation used in explosives. When Japan seized the rubber plantations of Asia, plants near the channel made the ingredients for synthetic rubber.

After the war, the chemistry kept going. Oil and gas became plastics and fibers, solvents and fertilizers, antifreeze, and the rubber in tires. The phone in your hand, the soles of your shoes and the fibers in your clothes may well have started as molecules on a coast like this one. This is downstream, past the fuel: things.

Texas City faces Galveston Bay, its docks and refineries on the open water. On the morning of April 16, 1947, smoke rose from the hold of the Grandcamp, a French freighter loaded with about 2,300… Read more tons of ammonium nitrate fertilizer. At 9:12, the ship exploded. The blast leveled the Monsanto chemical plant beside the docks, hurled a two-ton anchor more than a mile and a half, and set the waterfront on fire. Early the next morning, a second ship, the High Flyer, exploded too.

At least 576 people died, among them nearly all of the city's volunteer firemen. Sixty-three victims were never identified. At the time, it was the deadliest industrial accident in American history. In 2005, an explosion at the BP refinery here killed 15 workers. Federal investigators blamed cost-cutting and production pressure.

The Texas Medical Center now surrounds the ground where, in 1949, a wildcatter named Glenn McCarthy opened the largest hotel built in America that decade. Read more A wildcatter drills where no one has found oil, betting on unproven ground. McCarthy had struck oil 38 times. His Shamrock Hotel had 18 floors, 1,100 rooms, and a decor of 63 shades of green.

Opening night was St. Patrick's Day. He brought Hollywood stars in on his own airliner and by chartered train. Thousands crowded inside, and the evening grew so riotous that a live radio broadcast with Dorothy Lamour had to be cut off. McCarthy is widely seen as the model for Jett Rink, the oilman of Edna Ferber's novel Giant. Within three years he was deep in debt, and an insurance company took the hotel. Oil money rises fast. It can leave just as fast.

On the Galveston waterfront stands a retired drilling rig, the Ocean Star, now a museum. It is a jackup. Towed out over shallow water, it lowered its legs to the seabed and raised its deck above the waves. Read more Built in Beaumont in 1969, it drilled some 200 wells in the Gulf.

The move offshore began in November 1947, when Kerr-McGee struck oil about 10 miles off Louisiana, from a platform built by Houston's Brown & Root. It was the first well drilled out of sight of land. Later, floating rigs and drillships went into water thousands of feet deep. Offshore oil reaches large reserves, but it costs more, and the risks are greater. In April 2010, the Deepwater Horizon exploded in the Gulf. Eleven workers died, and more than 3 million barrels of oil reached the sea. The next crisis would come from overseas.

Beneath this low ground near Freeport lies a salt dome, and inside it, oil the nation keeps for emergencies. In October 1973, Arab oil producers cut off shipments to the United States. Read more Within months the price of a barrel nearly quadrupled, and Americans waited in long lines for gasoline. In December 1975, Congress created the Strategic Petroleum Reserve.

Engineers pumped fresh water into salt domes, dissolved enormous caverns, and filled them with crude. The Department of Energy says one cavern is large enough for Chicago's Willis Tower "to fit inside with room to spare." This site, Bryan Mound, has 19. It is the geology of Spindletop put to work: salt that once trapped oil by chance now stores it on purpose. The reserve peaked near 727 million barrels in 2009. After large emergency releases, the latest in 2026, it held less than 300 million.

In downtown Houston, two dark glass towers rise 10 feet apart, their tops cut at a slant. Read more Pennzoil Place, designed by Philip Johnson's firm, opened in the mid-1970s, as the embargo drove oil prices up and Houston boomed. Oil companies grow by finding oil. They also grow by buying each other.

In January 1984, Pennzoil agreed to buy part of Getty Oil. Days later, Texaco offered more, and Getty's board accepted. Pennzoil sued, saying it already had a deal. In November 1985, a Houston jury agreed, and awarded Pennzoil $10.5 billion, then the largest civil verdict in American history. In April 1987, Texaco, a company born at Spindletop, filed for bankruptcy. It settled with Pennzoil for $3 billion. By then, the boom that built these towers was over.

The tallest tower on Houston's skyline was finished in 1981 for Texas Commerce, the bank that grew from Jesse Jones's National Bank of Commerce. For 44 years, nothing in Texas stood taller. Read more It was a monument to the boom, and the boom was ending. When oil was expensive, drillers borrowed, builders built, and banks lent against both.

Then oil prices slid, and in 1986 they collapsed, from about $27 a barrel to below $10. Rigs stopped. Service companies laid off their crews. After 1986, no new office skyscraper rose in Houston for about a decade. Between 1982 and 1987, more than one job in seven in the Houston area disappeared. In 1987, Texas Commerce was sold to a New York bank. A price crash in one industry had spread through a whole city. Houston learned to diversify. It did not stop being the oil capital.

This 50-story tower on Smith Street was once the headquarters of Enron. Formed in 1985 by the merger of Houston Natural Gas and InterNorth, Enron began as a pipeline company. Read more When federal rules opened the natural gas market, it became a trader. Energy is bought and sold like any commodity, with prices set at hubs: Henry Hub in Louisiana for natural gas, Mont Belvieu, east of Houston, for natural gas liquids.

Enron traded almost anything, and hid debts and losses in its accounts. In December 2001, it filed for bankruptcy, then the largest in American history. A jury later found its chairman and its chief executive guilty of fraud. Rich Kinder had been Enron's president. He left in 1996 and co-founded Kinder Morgan, today one of North America's largest pipeline companies. One path led to prison. The other led to pipe in the ground. Today, this tower is Chevron's headquarters.

North of Houston, a planned town spreads through the pine forest. The oilman George Mitchell opened The Woodlands in 1974. Read more For nearly two decades, his company also tried to draw natural gas from the Barnett Shale near Fort Worth, rock so tight that most of the industry thought it could never pay. In 1997, an engineer named Nick Steinsberger tried a cheaper method, using mostly water in place of thick gels, and in 1998 a well came in strong.

Horizontal drilling joined it. Drill down, turn sideways, and run the well through the rock for thousands of feet. Then pump in water, sand and chemicals at high pressure to crack the rock, and let the gas and oil flow. Since 2018, the United States has been the world's largest oil producer. Shale remains debated, for its heavy use of water, and for earthquakes linked to wastewater disposal.

In late August 2017, Hurricane Harvey came ashore near Rockport and then stalled over the Texas coast for four days. Read more Near Port Arthur, more than 60 inches of rain fell, the most from any tropical cyclone in American records. Sixty-eight people died as a direct result. Texas holds nearly a third of the nation's refining capacity, much of it on low ground beside the water. As plants flooded or shut down, Gulf Coast refineries cut their crude runs by a third in a single week, and the national average price of gasoline rose 28 cents.

Here in Crosby, a chemical plant lost power, and with it the refrigeration that kept its products stable. Trailers of organic peroxides caught fire, and neighbors within a mile and a half were kept from home for a week. Studies published soon after estimated that a warming climate made Harvey's rainfall roughly 15 to 38 percent heavier.

The tour returns to Port Arthur, where the Texas Company, later Texaco, began refining in the boom after Spindletop. In 1903, its refinery here ran 850 barrels a day. Read more Grown many times over, it is now the largest refinery in the United States, able to process more than 650,000 barrels of crude a day. Its owner is Motiva, and since 2017, Motiva has belonged entirely to Saudi Aramco, the national oil company of Saudi Arabia.

Many of the world's largest oil companies are not private at all. They are owned by their governments. On the Houston Ship Channel, Shell's old Deer Park refinery, where wartime toluene was made, has been owned since 2022 by Pemex, Mexico's state oil company. The industry born on a Texas hill has gone global, and the world now owns a share of Texas.

On Quintana Island, at the old mouth of the Brazos, a plant turns natural gas into cargo. The gas is chilled to about 260 degrees below zero, Fahrenheit, until it becomes a liquid 600 times smaller in volume. Read more Then it can cross an ocean by tanker. Freeport LNG shipped its first cargo in September 2019.

For 40 years, the United States had barred nearly all exports of crude oil. Congress lifted the ban in December 2015, because shale had changed the arithmetic. When Russia invaded Ukraine in 2022, Europe moved to replace Russian gas, and American LNG filled much of the gap. In 2023, the United States supplied nearly half of Europe's imported LNG and became the largest LNG exporter in the world. In 1973, the country had been at the mercy of imported oil. Now its energy leaves from here for other countries.

In Midtown Houston, a 1939 Sears store has become the Ion, a hub for startups, opened by Rice University in 2021. Next door, Greentown Labs houses young companies working on climate technology. Read more To the west, along Interstate 10, the Energy Corridor holds the offices of ConocoPhillips, BP and Shell. And in 2024, Chevron announced it would move its headquarters to Houston.

The city calls itself the Energy Capital of the World, and the meaning of that phrase is changing. In 2023, the federal government chose the region for a hydrogen hub. Companies have proposed capturing carbon dioxide from the Ship Channel's plants and storing it deep underground. Some of those plans have since slowed or paused. The skills this tour has followed, drilling, refining, pipelines, trading and ships, are still here. What does an energy capital become, when the energy changes? Houston is working out the answer now.