When Spindletop first thundered into existence back in 1901, Houston was a good 80 miles away from the site of the legendary Beaumont gusher that hinted at the wealth of slick black crude deposited beneath the skin of the Lone Star State, but that didn’t matter. City leaders saw an opportunity, and almost overnight Houston transformed from a hub for timber and cotton into the epicenter of a burgeoning petroleum industry. Over the following decades, we rarely looked back.
By the 1970s our oil industry was in a golden era, when developments in the Middle East—the Arab oil embargo in 1973, followed by the Iranian Revolution in 1979—drove prices to new heights. People flocked to Texas, drawn by the promise of plentiful energy jobs while the rest of the U.S. economy stagnated. By 1980, the state's population had grown by 27 percent in a decade, with new arrivals landing in Houston to find bidding wars on any house or apartment available. Construction crews worked furiously to erect more office and living spaces across the city. And then, the bottom dropped out.
“It started with the 1982 recession,” says Bill Gilmer, head of UH’s Bauer College of Business. “Houston thought we were the smartest people on the earth at that time and had everything figured out, and the rest of the country just didn’t know how to run their business. Then oil prices started to fall.”
The collapse was slow at first, subtle even, as OPEC, the coalition of oil-producing countries that kept a handle on global prices by regulating its own production rates, opted to stop propping prices up. Then came a shift in the futures markets, thanks to a glut of oil coming in from Nigeria and the North Sea making crude plentiful and ticking the prices down. By the time it became clear that oil—and thus the entire Houston economy— was in trouble, it was too late to do anything about it.
“Oil prices definitively collapsed, and we thought we were seeing the worst of it,” Gilmer says. “But it turned out much of what was going on in Houston, both in the energy industry and across the rest of the economy— in banking, in real estate—was built on cheap money and risky business structures.”
It was brutal. Houston lost 211,000 jobs between February 1982 and March 1987. One out of eight Houstonians were unemployed because of the downturn. Tent cities became a part of the landscape. “Real estate collapsed because we had overbuilt,” says Gilmer. “All those people who’d moved down here from Michigan gave the banks the keys to their homes and moved back, because there was simply no work here.”
So many Houston banks were on the verge of collapse—they’d been lending money assuming that $35 oil prices in 1982 (a new high at that time) were the modern benchmark, but by 1986 oil was going for less than $10 a barrel—that the city lost its entire banking industry.
And as with the real Great Depression, the town weathered this economic disaster as the unemployed searched for new jobs and everyone figured out ways to scrape by. “Dallas became a financial center because everything consolidated up there,” says Gilmer, who worked for the Federal Reserve back then as an economist and witnessed the catastrophe firsthand. “We’d pull up to a bank in our navy-blue sedans, and women would cry and men would curse and everyone would rush to pull their money, because they knew we were there to close the bank. It was the Great Depression for Houston, no question.”
La Colombe d’Or and other tony restaurants offered “oil price” specials, in which the meal cost whatever the going rate per barrel was for the day. Donors also continued to dig into their pockets, with both the Wortham Center and The Menil Collection opening in 1987, the same year that saw more than 30,000 foreclosures in Harris County. People made the best of it. Some started taking classes at UH or HCC to build a path toward a career in a less unstable industry. Others snapped up cheap properties in the Heights and across the city, reminding themselves that while every oil boom has to bust, every bust has to end someday.
As a city, we started to climb out of the bust, and to celebrate the fact that we could endure together. “We started seeing all those bumper stickers, Give me another boom, and I promise not to mess it up this time,” says Gilmer.
And we learned to seize any fraction of hope. When the foreclosure rate dropped from 3,000 homes a month to just 2,000 a month in 1989, the Houston Post declared the bust over and published a retrospective supplement comparing the decade to a ride at AstroWorld, with highs and lows “unequaled in Houston’s history.” KTRK ran ads advising, “Watch out, world, Houston’s back!” It lasted a little longer than that. It wasn’t until April 1990 that we regained the 200,000 jobs our economy lost, but Houstonians learned something invaluable about themselves during the years it took to survive: the fact that we now knew we could.
“We’d made it,” Gilmer says. “Anyone who lived through it still celebrates that part to this day.”