Business Cycles and Innovation Cycles in the U.S. Upstream Oil & Gas Industry

Oil price cycles can be relatively long, but the time needed for research, development, and widespread adoption of important oilfield technologies can be even longer. Econometric analysis shows that U.S. upstream research and development efforts track oil price movements with a delay, but that the results of technology development requiring substantial R&D resources are often driven by innovations that arise independently of the business cycle. This research suggests that industry participants who expect to commercialize major technological or industry-changing innovations should be willing to reject a boomand- bust approach in favor of supporting R&D through business cycles. For market participants lacking that commitment, a more realistic strategy is an incremental, short-term focus on process improvements – but that approach has significant long term risks