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.
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 45.5 million tons, worth $4.6 billion.
``Nothing will ever approach the numbers that petroleum is bringing in,'' says Thomas Heidt, market research manager for the Port of Houston Authority.
Nonetheless, trends in the oil industry will shape the future of the port of Houston, directly or indirectly affecting 140,000 local jobs. Currently, oil shipments through the port are at the highest levels in two decades and are likely to continue to rise given the increasing US dependence on imported oil.
But looking solely at the US oil import picture is misleading in terms of what's happening to the world energy mix. Despite the ongoing discovery of new oil reserves worldwide, nations have generally tried to reduce petroleum consumption by turning to alternatives.
Last year, oil accounted for 38 percent of the world's primary energy demand, continuing its steady decline since the price shocks and supply scares of the 1970s. Energy-efficiency measures and fuel substitution have restrained demand for oil. Energy experts disagree over whether the trend away from oil reliance will continue.
Yet, known reserves of oil are more plentiful than ever: more than 1 trillion barrels today versus 625 billion barrels in 1973, the year Arab oil exporters embargoed exports to the US.
The jump in reserves hasn't been uniform among oil-producing nations. Last year, Saudi Arabia, Venezuela, Malaysia, and Brazil all increased their reserves by more than 500 million barrels. But US reserves dropped by 900 million barrels, according to Royal Dutch/Shell Group, the world's second largest oil company.
OPEC members account for more than 75 percent of world oil reserves. At current rates of production, OPEC has 80 years of reserves left - double the world average, according to Shell. Four-fifths of OPEC production is exported.
The increase in reserves has helped keep oil price low. Indeed, oil is cheaper now than in the late 1970s in constant dollars, and much cheaper in real (inflation adjusted) dollars. This year, oil bounced up to as much as $21 per barrel. But the gains seem always to evaporate. World benchmark North Sea Brent Blend crude currently trades in the $15 to $16 per barrel range.
Cambridge Energy Research Associates, a Boston-based energy consulting firm, predicts that prices will not fall below $15 again, or at least will not stay there for very long. CERA bases its belief on an analysis of oil-industry developments, market psychology, and computerized trading in its recent report, ``Setting the Trend: The New Triangle of Price Determination.''