Tanker Captains Know the Way to Houston Combination of Low Prices and Dwindling Reserves Is Boosting US Oil Imports from around the World

Article excerpt

WHETHER carrying a cargo of Arabian Heavy from the Persian Gulf or Sumatran Light from the South China Sea, captains may guide their supertankers to 29 degrees 45 minutes north, 95 degrees 20 minutes west - coordinates for the port of Houston.

This city of plate-glass corporate towers is known worldwide as the capital of the oil industry. While the business is downtown, the actual oil can be found a dozen miles east, where a different sort of skyline rises above the humid, coastal flatlands.

Along 25 miles of the chocolate-colored Houston Ship Channel stand refineries, chemical plants, tank farms, and pipeline terminals - $17 billion-worth of steel structures that make Houston the No. 1 petroleum port in the No. 1 petroleum-consuming nation.

Last year, world output of oil reached 65 million barrels a day. The United States produced 13 of every 100 barrels but had to import just as much to meet its demand for gasoline, jet fuel, home heating oil, and other uses. About 10 percent of US petroleum imports, more than 800,000 barrels a day, pass through Houston.

In fact, 60 percent of the world's oil is shipped somewhere by sea, owing to the disparity between where oil is produced and where it is needed. A fleet of 3,000 tankers and innumerable barges accomplish the task. Single oil market

In the 1980s, oil began to be traded much like other commodities. Private, long-term agreements gave way to what, in effect, is a single market in which all participants know the price and quantity of everyone else's transactions. As a result, any event that affects oil supply somewhere in the world causes the price of oil to rise or fall everywhere.

For example: Will the Northern Hemisphere's winter be unusually cold? Will the United Nations allow Iraq to resume exports of oil? When the Organization of Petroleum Exporting Countries (OPEC) meets in November, will it decide to stick to its 24.52 million-barrels per day production ceiling? Will Russia scrap its "special exporter" system of channeling oil exports through a handful of authorized companies?

The same factors that affect price also govern traffic and operations at the Houston port. Consider that the price of oil floundered in 1993, ending the year just above $12 a barrel, one-third of its price in the early 1980s. That allowed non-oil exporters Germany and Japan to earn a place last year among the top five exporters to Houston in dollar value. Saudi Arabia, the world's leading oil exporter, ranked a mere third. Petroleum dominant

Still, in tons of cargo, the top five exporters to Houston were all oil-producers: Saudi Arabia, Venezuela, Mexico, Kuwait, and Algeria. And as a category, petroleum and petroleum products dominated Houston imports with 45. …