A publication of the Greater Houston Partnership Volume 22, Number 6 June 2013

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1 A publication of the Greater Houston Partnership Volume 22, Number 6 June 2013 Prosperity Fueled by Oil and Gas Houston owes much of its current good fortune to the thriving energy industry. Since January 10, the three pillars of upstream energy exploration and production, oil field services and equipment manufacturing have created 39,200 jobs. Though upstream represents only one in every 20 jobs in the region, the sector accounts for one in every eight jobs created in the recovery and expansion. Engineering and fabricated metal products, sectors closely aligned with energy, have created another 24,900 jobs. Together, these sectors represent one in every five jobs created in Houston since the bottom of the recession. Job growth in energy is important for two reasons that somewhat overlap the multiplier effect and the high level of pay in the industry. The U.S. Bureau of Economic Analysis (BEA) has studied how inputs from one industry in a region support the outputs of other industries in that region. In Houston, with more than 3,700 firms engaged in the energy business, those supply links are wide and deep. According to the BEA, each exploration job in Houston supports another seven jobs elsewhere in the region. Each job in oilfield services supports another 11 in the region. JOBS CREATED IN HOUSTON METRO AREA January 10 through April 13 Industry/Sector Jobs % of Total Oil and Gas Extraction 10, Oil Field Services 16, Oil Field Equipment Manufacturing 12, Fabricated Metal Products 13, Architectural and Engineering Services 11, Energy and Energy Related Subtotal 64, All Other Industries/Sectors 241, Total Houston Region 305, Source: Texas Workforce Commission AVERAGE ANNUAL SALARIES Calendar 12 Energy-Related Industries, Houston Metro Area Oil and Gas Extraction $223,652 Oil Field Services $122,356 Oil Field Equipment Manufacturing $117,884 Architectural and Engineering Services $117,832 Fabricated Metal Products $73,944 Average - All Industries in Houston $65,312 Source: Quarterly Census of Employment and Wages Jobs in energy also pay well. According to the Quarterly Census of Employment and Wages (QCEW), the average annual wage in oil and gas extraction in the metro area exceeds $220,000. Granted, that s an average, but it s well above the $65,300 average for the region as a whole. One might say that a single job in energy exploration has the impact on the consumer market of three typical jobs elsewhere in the economy. Jobs in engineering, oil field equipment manufacturing and oil field services also pay above average. It s no wonder the energy sector accounts for $7.1 billion nearly one-third of the $22.7 billion increase in wages and salaries the region has recorded since January 10. Energy industry jobs also often include generous benefits packages. June , Greater Houston Partnership Page 1

2 Several industries owe their current prosperity to the energy industry. According to CBRE, 4.5 million square feet (msf) of the 8.0 msf in office space currently under construction is either in the Energy Corridor or build-to-suit space for an energy company elsewhere in the region. This does not include the estimated 3.0 msf office campus Exxon is building in the northern part of Harris County. Local merchants rang up $30.6 billion in sales last year, a $2.9 billion increase over 10, a direct benefit of the increased purchasing power from the energy sector. And the Houston Association of Realtors (HAR) reports that the number of homes priced at $250,000 and above the prime market for those earning energy industry salaries has risen for 15 consecutive months. Given the role energy has played in Houston s recovery and ongoing expansion, two questions arise. First, has the current boom made Houston once again overly dependent on energy? Many residents fear a repeat of the 80s, when oil prices collapsed, taking one in seven jobs with them. Second, how long can the industry grow at its current pace? Early signs suggest the current industry cycle may have begun to slow. ANNUAL WAGES & SALARIES Houston Metro Area ($ Billions) Natural Resources as Year Metro Total Resources % of Total 90 $ $3, $ $ $ $ $ $ $ $ * $ $ * For the first nine months of the year only. Source: Quarterly Census of Employment and Wages Assessing whether Houston has become too dependent on oil and gas poses a challenge. Over the past three decades, geographies, industry classifications and data series have changed. 1 Where good data are available, they don t reach back to the 80s, a time when everyone agrees Houston was too dependent on upstream energy. Perhaps the simplest way to assess Houston s energy dependence is to measure the share of local wages and salaries attributable to the industry over time. These data are available in the QCEW going back to 90, but the level of industry detail is limited. Wage data are available only for natural resources and mining, but not for energy services, equipment manufacturing, or engineering. For the purposes of this analysis, natural resources and mining serves as a proxy for the industry as a whole. A review of QCEW data shows that energy s share of Houston-area wages held constant throughout the 90s, which is not surprising given that oil prices hovered around $20 per barrel during that time and the decade ended with only 1,500 more employees working in natural resources and mining than when the decade began. Oil prices didn t rise until the mid- 00s, about the time hiring picked up and energy began to account for a larger share of area wages. Over the past dozen or so years, resources and mining has gone from supplying one in every 14 payroll dollars to one in every 10. Houstonians have become more dependent on 1 For example, over the past three decades, the Houston metro area has included six, eight, nine and 10 counties. For large counties such as Harris, detailed information is available for the energy industry. For smaller counties such as Austin, oil exploration is lumped with mining and oil field equipment is lumped with manufacturing. June , Greater Houston Partnership Page 2

3 energy for their livelihoods, but that is a trend which began prior to the Great Recession and the recent run-up in oil prices. There are signs the energy sector is beginning to cool. The North American drilling rig count peaked at 2,013 in November 11 and has trended downward since. West Texas Intermediate the U.S. benchmark for light, sweet crude climbed above $100 a barrel in the spring of 11 but has since trended downward. Revenues from the North American operations for the three largest oil field service companies Baker Hughes, Halliburton and Schlumberger fell $865 million, or 8.2 percent, in the first quarter of 13 compared to the same quarter in 12. And energy industry employment, which was growing at a Employment Growth Rates Oil and Gas Extraction Recent Peak: 12.3% May 12 Current: 6.9% April 13 Oilfield Services Recent Peak: 21.5% Dec 11 Current: 7.2% April 13 Oilfield Equip Manufacturing Recent Peak: 16.6% June 12 Current: 8.1% April 13 Source: Texas Workforce Commission North American Rig Count monthly avg. Trough: 895 June 09 Recent Peak: 2,013 Nov 11 Current: 1,767 May 13 West Texas Intermediate - $/bbl Trough: $39.50 Dec 08 Recent Peak: $ April 11 Current: $95.16 May 13 Henry Hub Natural Gas - $/mcf Trough: $1.94 April 12 Recent Peak: $5.78 Jan 10 Current: $3.98 May 13 Source: Baker Hughes, U.S. Energy Information Administration double-digit annual rate this time last year, now is rising at half that pace. Clearly, the energy sector is entering a mature part of the business cycle, but several factors support continued long-term growth. First, the demand for natural gas continues to grow. The U.S. Energy Information Administration (EIA) forecasts electric power and industrial consumption of natural gas to grow from 6.8 trillion cubic feet (TCF) in 11 to 7.8 TCF in 25 as these sectors switch from coal to clean burning natural gas. 2 The EIA expects the United States to become a net exporter of natural gas by the end of this decade, shipping as much as 3.6 TCF overseas by 40. The Federal Energy Regulatory Commission has already approved two export terminals on the Gulf Coast, and another two dozen firms have applications pending. And the nation may be on the cusp of a manufacturing renaissance spurred by abundant, inexpensive natural gas. The American Chemistry Council has identified approximately 100 U.S. manufacturing projects announced or under construction, including 28 along the Texas Gulf Coast, specifically tied to low cost natural gas. Second, the demand for liquid fuels continues to grow. The EIA expects world petroleum and liquids consumption to rise from 89 million barrels per day in 13 to 111 to 118 million barrels per day in 40. Houston-based companies will play a major role in finding and producing petroleum and liquids to supply that demand wherever the resources may be located. 2 The U.S. Energy Information Administration has recently released a detailed study of long-term energy supply and demand, Annual Energy Outlook 2013 with Projections to Find the study at The forecasts cited here are based on EIA s Reference Case, which is a business-as-usual trend estimate given known technology and technological and demographic trends. June , Greater Houston Partnership Page 3

4 Third, there s nothing structurally wrong with Houston s economy. Houston s housing market is not overbuilt witness the 3.4-month supply of inventory in the HAR s Multiple Listing Service. A six-month supply is considered a balanced market. If anything, Houston needs to build more housing. Nor is housing overpriced. The 2012 Council for Community and Economic Research Cost of Living Index found home prices in Houston to be 14.6 percent below the nationwide average and 33.5 percent below the average for the 29 metro areas with more than 2 million residents. According to CBRE, the office vacancy rate stood at 7.4 percent in the first quarter of 13 and is expected to decline. The rate was 12.5 percent just three years ago. In a market with 190 msf of completed office space, only 8.0 msf is under construction, with much of it pre-leased. And in recent years, Houston has transformed its image from a blue-collar cow town to an urbane and sophisticated city. In July 12, Forbes ranked Houston as first among America s Coolest Cities to Live. In January 13, The New York Times ranked Houston seventh in the world and first in the U.S. on its list of Places to Go in And in May 13, Business Insider ranked Houston as The Best City in America. Granted, the region faces challenges with workforce development, transportation and quality of life issues. The community led by the Greater Houston Partnership is taking steps to address those challenges. The pace of growth will eventually cool from 100,000 jobs per year to a more sustainable 60,000-70,000 jobs per year. The region will still prosper. Wacobased economist Ray Perryman forecasts Houston s gross regional product to more than double between now and 40. The Partnership sees nothing on the horizon that would derail that forecast. Employment Update During the 12 months ending April 13, the Houston-Sugar Land- Baytown Metro Area led the state in job growth, adding 111,200 net new jobs, a 4.2 percent increase, according to Texas Workforce Commission estimates. Dallas-Fort Worth recorded the second largest gain, adding 104,900 jobs, a 3.5 percent increase, and Austin netted the third largest, adding 31,400, or 3.8 percent. Employment Change, April '12 - April '13, Metro Houston 17,900 7,200 11,400 9,500 8,200 13,100 14,000 14,600 7,700 2, ,900 1,800 Source: Texas Workforce Commission June , Greater Houston Partnership Page 4

5 With 23.7 percent of the state s population, Houston accounted for 33.6 percent of the state s annual job growth. If one adds the annual job growth for Texas 23 largest metro areas (excluding Dallas-Fort Worth), the total would still fall 21,400 jobs short of Houston s annual job growth. Every sector of Houston s economy experienced job growth since April 12. Since the bottom of the recession, the Houston metro area has added 305,500 net new jobs, which is more than the current total employment of the El Paso metro area (286,700). Employment is higher now than at any point in Houston s history. PMI Update The Houston Purchasing Managers Index (PMI), a short-term leading indicator for regional production, registered 58.4 in April 13, down from 61.0 in March, according to the latest report from the Institute for Supply Management-Houston. For the first four months of 13, the PMI has averaged 59.9, slightly above the average of 59.4 over the same period in 12. The PMI has a possible range from zero to 100. Readings above the neutral point of 50 indicate likely growth in production over the next three to four months; readings below 50 suggest contraction. With the April reading, the PMI has held above 50 for 44 consecutive months. The PMI is derived from monthly surveys of local purchasing managers representing various industries such as manufacturing, healthcare, and energy. It s based on eight components: sales, production, employment, purchases, prices paid, lead times, purchased inventory and finished goods inventory Houston Purchasing Managers Index 50 = Neutral 30 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: Institute for Supply Management-Houston Brookings Pays a Visit On May 15, Rice University and the Greater Houston Partnership hosted the Global Cities Initiative (GCI), a joint project of the Brookings Institution and JPMorgan Chase. Houston was one of five cities chosen to participate in this year s GCI; the others were Atlanta, Dallas, Denver, and Mexico City. The goal of the GCI is to create an international network of leaders from global cities that are intent on deepening global trade relationships and collaborating to compete more effectively. The forum discussed the importance of strengthening global trade and investment in order for Houston to leverage its position in the global market. Since the majority of markets that June , Greater Houston Partnership Page 5

6 are experiencing the fastest GDP growth are located outside the U.S., bolstering Houston s worldwide exports of goods and services to these global metros is vital to the region s growth. According to the Brookings analysis of 10 trade data of the nation s 100 largest metro areas, Houston ranked fourth among U.S. metros in export value, fourth in total export-supported jobs, and 14th in the share of metro GDP attributed to exports. Brookings estimates that the Houston region exported $47.9 billion in 10 3 and that these exports supported 307,000 jobs. 4 Approximately 14.0 percent of Houston s GDP in 10 was attributed to exports. Export Performance of Top 10 U.S. Metro Areas by Exports Value (2010) Rank Metro Exports Value, Export Supported Jobs Metro GDP (%) Exports Share of (billions $) 1 Los Angeles , New York , Chicago , Houston , Dallas , San Francisco , Seattle , Detroit , Philadelphia , Boston , Source: Brookings Institute, Export Nation 2012: How U.S. Metropolitan Areas are Driving National Growth. The locus of economic power in the world is shifting, said Bruce Katz, Brookings vice president and co director of the Metropolitan Policy Program. The rising metro performers today are in Asia and Latin America. We need to reorient our economy so more firms in more sectors trade more goods and services seamlessly with the world. Metro areas like Houston will be on the forefront of this nationwide effort. Participants in the GCI also discussed Houston s workforce development issues. Brookings calculated that the manufacturing, energy and health care sectors account for more than 675,000 jobs, or about one quarter of Houston s employment. Currently, more than 40 percent of workers in the energy and health care sectors have a bachelor s degree or higher. Only 24 percent of workers in the manufacturing sector have a bachelor s degree or higher. However, as manufacturing becomes more advanced and incumbent workers with decades of on-the-job experience retire, Brookings anticipates that future demands in manufacturing will require higher educational attainment levels. Additionally, Houston s share of jobs in STEM-focused fields (Science, Technology, Engineering and Math) exceeds that of the nation. About a third of Houston s jobs are in STEMfocused fields, whereas a quarter of U.S. jobs are STEM-focused. Although the Houston region ranks fifth in population, it ranks 33 rd in its share of STEM degrees. During the GCI forum, several stakeholders convened to discuss Houston s workforce development needs, and 3 Brookings defines export value as the dollar value of exports produced within a metro area in In previous issues of Glance, export value is the total dollar value of exports shipped through the Houston-Galveston Customs District, including commodities produced in and out of the metro area. 4 Includes both direct export-production jobs and jobs supported by exports in firms that supply an exporting industry. Some portion of these jobs lie in parts of the U.S. outside of the metro area producing the exports. June , Greater Houston Partnership Page 6

7 the Partnership announced its regional initiative to tackle major workforce preparedness issues in the region. Airport Update For the first four months of 13, the Houston Airport System (HAS) handled million passengers, a 0.1 percent decrease from million during the same period in 12. The decline reflects a 0.2 percent decrease in domestic traffic, from million through April 12 to million through April 13. International traffic increased by 0.3 percent from 2.86 million through April 12 to 2.87 million through April 13. HAS launched and announced new air service to several cities recently: Southwest Airlines began direct flights from Hobby Airport to Pittsburgh on April 14 and announced that nonstop flights to Washington National Airport (DCA) will commence on August 4. Southwest won one of the coveted slots to fly into DCA and chose to allot it to Hobby since it is one of the largest airports located within DCA s 1,250 mile perimeter that does not have nonstop flights to the airport. Spirit Airlines began nonstop flights from Bush Intercontinental to Los Angeles International Airport on April 25. This was the sixth route added by Spirit since the airline entered the Houston market in September 12. Frontier Airlines announced it will begin offering nonstop service between Hobby Airport and Delaware s New Castle Airport on July 2. Patrick Jankowski and Jenny Philip contributed to this issue of Houston: The Economy at a Glance STAY UP TO DATE! Are you a GHP Member? If so, log in to your account here and access archived issues of Glance available only to members. You can also sign-up RSS feeds to receive Houston s latest economic data throughout the month. If you are a nonmember and would like to receive this electronic publication on the first working day of each month, please your request for Economy at a Glance to dmorrow@houston.org. Include your name, title and phone number and your company s name and address. For information about joining the Greater Houston Partnership and gaining access to this powerful resource, call Member Services at The Key Economic Indicators table is updated whenever any data change typically, 11 or so times per month. If you would like to receive these updates by , usually accompanied by commentary, please your request for Key Economic Indicators to dmorrow@houston.org with the same identifying information. You may request Glance and Indicators in the same . June , Greater Houston Partnership Page 7

8 Houston Economic Indicators A Service of the Greater Houston Partnership MONTHLY DATA YEAR-TO-DATE TOTAL or YTD AVERAGE* Most Year % Most Year % Month Recent Earlier Change Recent Earlier Change ENERGY U.S. Active Rotary Rigs May '13 1,767 1, ,759 * 1,982 * Spot Crude Oil Price ($/bbl, West Texas Intermediate) May ' * * -7.4 Spot Natural Gas ($/MMBtu, Henry Hub) May ' * 2.32 * 60.3 UTILITIES AND PRODUCTION Houston Purchasing Managers Index Apr ' * 59.4 * 0.8 Nonresidential Electric Current Sales (Mwh, CNP Service Area) Apr '13 4,086,503 4,116, ,651,778 15,752, CONSTRUCTION Total Building Contracts ($, Houston MSA) Apr '13 971,248,000 1,116,210, ,555,601,000 3,593,966, Nonresidential Apr '13 267,759, ,058, ,856,000 1,441,063, Residential Apr '13 703,489, ,152, ,559,745,000 2,152,903, Building Permits ($, City of Houston) Apr '13 431,902, ,543, ,964,983,997 1,472,963, Nonresidential Apr '13 261,606, ,696, ,341,635,037 1,000,542, New Nonresidential Apr '13 81,865,214 32,078, ,702, ,781, Nonresidential Additions/Alterations/Conversions Apr '13 179,741, ,617, ,932, ,761, Residential Apr '13 170,295, ,847, ,348, ,421, New Residential Apr '13 150,355,422 93,318, ,398, ,439, Residential Additions/Alterations/Conversions Apr '13 19,940,455 24,528, ,950,135 77,981, Multiple Listing Service (MLS) Activity Closings Apr '13 7,883 6, ,816 20, Median Sales Price - SF Detached Apr '13 184, , ,150 * 153,200 * 9.1 Active Listings Apr '13 32,498 42, ,024 * 42,199 * EMPLOYMENT (Houston-Sugar Land-Baytown MSA) Nonfarm Payroll Employment Apr '13 2,780,700 2,669, ,754,900 * 2,643,150 * 4.2 Goods Producing (Natural Resources/Mining/Const/Mfg) Apr '13 541, , , ,225 * 5.7 Service Providing Apr '13 2,238,900 2,155, ,217, ,134,925 * 3.9 Unemployment Rate (%) - Not Seasonally Adjusted Houston-Sugar Land-Baytown MSA Apr ' * 6.8 * Texas Apr ' * 6.8 * U.S. Apr ' * 8.1 * FOREIGN TRADE (Houston-Galveston Customs District) Port of Houston Authority Shipments (Short Tons) Apr '13 3,541,821 3,514, ,352,458 14,186, Air Passengers (Houston Airport System) Apr '13 4,083,502 4,160, ,010,271 16,032, Domestic Passengers Apr '13 3,360,661 3,432, ,137,221 13,169, International Passengers Apr '13 722, , ,873,050 2,863, Landings and Takeoffs Apr '13 71,628 72, , , Air Freight (metric tons) Apr '13 36,441 36, , , Enplaned Apr '13 19,029 18, ,669 52, Deplaned Apr '13 17,412 17, ,470 49, CONSUMERS New Car and Truck Sales (Units, Houston MSA) Apr '13 28,351 31, , , Cars Apr '13 12,491 14, ,405 48, Trucks, SUVs and Commercials Apr '13 15,860 16, ,653 60, Total Retail Sales ($000,000, Houston MSA, NAICS Basis) 4Q12 30,682 30, , , Consumer Price Index for All Urban Consumers ('82-'84=100) Houston-Galveston-Brazoria CMSA Apr ' * * 0.7 United States Apr ' * * 1.5 Hotel Performance (Houston MSA) Occupancy (%) 4Q * 59.8 * Average Room Rate ($) 4Q * * 4.0 Revenue Per Available Room ($) 4Q * * 13.8 POSTINGS AND FORECLOSURES Postings (Harris County) Apr '13 1,309 2, ,720 12, Foreclosures (Harris County) Apr ' ,901 3, June , Greater Houston Partnership Page 8

9 Sources Rig Count Baker Hughes Incorporated Spot WTI, Spot Natural Gas U.S. Energy Information Admin. Houston Purchasing Managers National Association of Index Purchasing Management Houston, Inc. Electricity CenterPoint Energy Building Construction Contracts McGraw-Hill Construction City of Houston Building Permits Building Permit Department, City of Houston MLS Data Houston Association of Realtors Employment, Unemployment Texas Workforce Commission Port Shipments Aviation Car and Truck Sales Retail Sales Consumer Price Index Hotels Postings, Foreclosures Port of Houston Authority Aviation Department, City of Houston TexAuto Facts Report, InfoNation, Inc., Sugar Land TX Texas Comptroller s Office U.S. Bureau of Labor Statistics PKF Consulting/Hospitality Asset Advisors International Foreclosure Information & Listing Service June , Greater Houston Partnership Page 9

10 HOUSTON MSA NONFARM PAYROLL EMPLOYMENT (000) Change from % Change from Apr '13 Mar '13 Apr '12 Mar '13 Apr '12 Mar '13 Apr '12 Total Nonfarm Payroll Jobs 2, , , Total Private 2, , , Goods Producing Service Providing 2, , , Private Service Providing 1, , , Mining and Logging Oil & Gas Extraction Support Activities for Mining Construction Manufacturing Durable Goods Manufacturing Nondurable Goods Manufacturing Wholesale Trade Retail Trade Transportation, Warehousing and Utilities Utilities Air Transportation Truck Transportation Pipeline Transportation Information Telecommunications Finance & Insurance Real Estate & Rental and Leasing Professional & Business Services Professional, Scientific & Technical Services Legal Services Accounting, Tax Preparation, Bookkeeping Architectural, Engineering & Related Services Computer Systems Design & Related Services Admin & Support/Waste Mgt & Remediation Administrative & Support Services Employment Services Educational Services Health Care & Social Assistance Arts, Entertainment & Recreation Accommodation & Food Services Other Services Government Federal Government State Government State Government Educational Services Local Government Local Government Educational Services SOURCE: Texas Workforce Commission June , Greater Houston Partnership Page 10

11 NONFARM PAYROLL EMPLOYMENT (000) 12-MONTH CHANGE (000) HOUSTON THE ECONOMY AT A GLANCE PURCHASING MANAGERS INDEX HOUSTON & U.S Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 HOUSTON U.S. Source: National Association for Purchasing Management - Houston, Inc. HOUSTON MSA EMPLOYMENT ,800 2,750 2,700 2,650 2,600 2,550 2,500 2,450 2,400 2,350 2,300 2,250 2,200 2,150 2,100 2,050 2, , Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan MONTH CHANGE JOBS Source: Texas Workforce Commission June , Greater Houston Partnership Page 11

12 PERCENT OF LABOR FORCE GOODS-PRODUCING (000) SERVICE-PROVIDING (000) HOUSTON THE ECONOMY AT A GLANCE GOODS-PRODUCING AND SERVICE-PROVIDING EMPLOYMENT HOUSTON MSA ,250 2,200 2,150 2,100 2,050 2,000 1,950 1,900 1,850 1,800 1,750 1,700 1, ,600 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 GOODS-PRODUCING JOBS SERVICE-PROVIDING JOBS Source: Texas Workforce Commission 11 UNEMPLOYMENT RATE HOUSTON & U.S Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 HOUSTON U.S. Source: Texas Workforce Commission June , Greater Houston Partnership Page 12

13 WEST TEXAS INTERMEDIATE ($/BBL) HENRY HUB NATURAL GAS ($/MMBTU) HOUSTON THE ECONOMY AT A GLANCE SPOT MARKET ENERGY PRICES Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 WTI Monthly WTI 12-MO AVG GAS MONTHLY GAS 12-MO AVG Source: U.S. Energy Information Administration 6% INFLATION: 12-MONTH CHANGE % 4% 3% 2% 1% 0% -1% -2% -3% Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 HOUSTON CPI-U U.S. CPI-U Source: U.S. Bureau of Labor Statistics June , Greater Houston Partnership Page 13