After the Collapse

Several trends established were established in the wake of the collapse in crude prices. The lag of over a year for drilling to respond to crude prices is now reduced to a matter of months. (Note that the graph on the right is limited to rigs involved in exploration for crude oil as compared to the previous graph which also included rigs involved in gas exploration.) Like any other industry that goes through hard times the oil business emerged smarter, leaner and more conservative. Industry participants, bankers and investors were far more aware of the risk of price movements. Companies long familiar with accessing geologic, production and management risk added price risk to their decision criteria.

Technological improvements were incorporated:

• Increased use of 3-D seismic data reduced drilling risk.
• Directional and horizontal drilling led to improved production in many reservoirs.
• Financial instruments were used to limit exposure to price movements.
• Increased use of CO₂ floods and improved recovery methods to improve production in existing wells.

In spite of all of these efforts the percentage of rigs employed in drilling for crude oil decreased from over 60 percent of total rigs at the beginning of 1988 to under 15 percent until a recent resurgence.

U.S. Rotary Rig Count
Exploration for Oil