Geophysical Advances in the Midst of Uncertainty—The 1990s
2001. "Geophysical Advances in the Midst of Uncertainty—The 1990s", Geophysics in the Affairs of Mankind: A Personalized History of Exploration Geophysics, L. C. (Lee) Lawyer, Charles C. Bates, Robert B. Rice
Download citation file:
Oil prices slowly recovered from the drastic fall in 1986, but, unlike the earlier recoveries, no one was predicting $80/barrel. Most oil company economists thought that the price of oil would stabilize around $18/barrel. This prediction was rudely interrupted by the invasion of Kuwait by Iraq in 1990 and the subsequent Gulf War. Prices jumped to record levels. Oil company profits soared. With Iraq’s production cut off, the prices settled down to around $17/bbl but as the Asian economies suffered so did the price of oil. OPEC was unwilling (or unable) to alter the situation by cutting back on production quotas. The prices fell to about $11/bbl or less throughout much of 1998. Regular gasoline prices dropped to less than $0.80/gallon, which, on a constant dollar basis was less than 1950 gasoline prices.
Adjusted for inflation, one can see that the price of oil has been relatively constant for many years, except for the big spike in the early eighties (see Figure 9.1).2 As discussed in Chapter 8, the industry went through structural adjustments both during the boom and then with the price decline. Mergers, buyouts, and layoffs streamlined the industry, greatly cutting the expense side of the ledger. The continued gradual decline in prices in 1998 brought about mega-mergers. British Petroleum (BP) bought Amoco and then later picked up Arco. The biggest of all was the merger of Exxon and Mobil, which was followed by Chevron and Texaco. The impact of these consolidations will be