An Industry in Turmoil—The Mid-to-Late 1980s
2001. "An Industry in Turmoil—The Mid-to-Late 1980s", Geophysics in the Affairs of Mankind: A Personalized History of Exploration Geophysics, L. C. (Lee) Lawyer, Charles C. Bates, Robert B. Rice
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Following World War II, crude oil could be obtained dirt cheap from the Middle East. Thus, world petroleum prices remained stable in the $2.50/barrel price range for the next quarter century (see Figure 8.1). One result was that the industry acquired a very complacent—even unnatural—attitude towards exploring for new oil. Consequently risk evaluation primarily drove exploration decisions. Annual exploration and new field development budgets were allocated as a relatively constant percentage of overall anticipated revenues, as were supporting research funds.
In 1970, the Shah of Iran, needing additional cash flow, persuaded the Organization of Petroleum Exporting Countries (OPEC) to drive up the world price of crude oil, as mentioned in the prior chapter, from $3/barrel in 1970 to $42/barrel in 1981. All told, by means of trade embargoes and forced nationalization, OPEC leaders were able to create four major price shocks in crude oil prices between 1970 and 1986, three being upwards and one downwards (Hammer, 1975). As long as the shocks were upward, industrial geophysics flourished. Thus, by September 1981, 1084 field crews, an all-time record, were at work outside the Communist World. The SEG’s annual convention the autumn before had also set records with 12 319 attendees for a 13 800 member society (Carlile, 1981).
These price shocks wherein the world price of crude increased by an order of magnitude within a decade, placed the petroleum industry under great stress. Both political leaders and consumer groups claimed:“The oil companies are at fault. This is nothing but