New Drilling Technology

Thomas J. Cunningham and Whitney Mancuso
Economic Review, Vol. 83, No. 2, 1998

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Economic shocks are not always negative. Indeed, this article suggests that the energy extraction industry is experiencing a positive shock caused by two new technologies—three-dimensional imaging and directional drilling. Combined, these techniques have lowered the net extraction costs of oil and gas. The new technologies are particularly advantageous for the kinds of fields characteristic of the Gulf of Mexico, and the article points to their early application in Louisiana as indicating the type of impacts one might expect as use of the technologies spreads.

The authors conclude that while the worldwide effects of this technology shock have yet to be felt, particularly its implications for offshore energy development, the impact on costs in fields like those in the gulf is likely to be significant.

June 1998