1 THE PURSUIT OF INNOVATION Readers of the Wall Street Journal saw an encouraging headline in September 2015 Oil Companies Tap New Technologies to Lower Production Costs 1 By the early 2000s oil had become one of the world’s most critical yet most criticized resources It generated huge amounts of electricity and fueled a majority of the world’s cars But the evidence for its negative impact on the environment both during extraction and when used was mounting Oil was also at the center of international political controversies Headlines about these negative aspects of oil frequently appeared in newspapers Now the Wall Street Journal headline was highlighting the ways in which petroleum companies were trying to use technological innovation to improve efficiency and become more environmentally friendly The story was about new approaches to oil and gas discovery that industry leaders hoped would make the process less expensive The efforts were linked to the sinking price of gasoline By the summer of 2015 prices had dropped to their lowest levels in years In some parts of the United States one gallon 3 8 L of gas could be For more than a century oil has powered much of the world’s transportation 5
purchased for approximately 1 50 2 Considering the average price just a year before 3 34 per gallon it was an astonishing development 3 The low prices were good The rise and fall of gasoline prices can have widespread effects on the economy Why Did Gasoline Prices Fall in 2015 The price of gasoline is impossible to predict from day to day but historical data has shown a clear tendency to experience notably high and low periods An example of the latter began in 2015 One of the most significant factors for this was an oversupply of oil on the market Part of the reason for it was overproduction by leading suppliers to meet the perceived needs of expanding middle classes in other countries Another factor was Iran’s reentry into the international oil markets after sanctions enacted by the United States and other nations were lifted following Iran’s agreement to abandon its nuclear weapons program in July 2015 With so much excess prices dropped until the supply-demand ratio returned to balanced levels news for consumers but not for the oil companies With falling prices came falling earnings and with that came the need to cut jobs Quicksilver Resources Incorporated a Texas-based company that drills for raw petroleum and natural gas was forced to file for bankruptcy in March 2015 and lay off more than 150 members of its workforce A second Texas outfit National Oilwell Varco made plans to cut more than 100 employees and close one of its manufacturing sites 4 Maersk Drilling headquartered in Denmark had to shut down one of its offshore rigs and let all of the rig’s workers go But rather than allow the situation to worsen companies turned to scientific research to find cheaper ways to bring their product to market 6
