DRAFT Technological Change and Depletion in Offshore Oil and Gas

A critical concern for continued growth of the world economy is whether technological progress can mitigate resource depletion. This paper measures depletion effects and technological change for offshore oil production in the Gulf of Mexico using a unique field-level data set from 1947-1998. The study supports the hypothesis that technological progress has mitigated depletion effects over the study period, but the pattern differs from the conventional wisdom for non-renewable resource industries. Contrary to the usual assumptions of monotonic changes in productivity or an inverted “U” shaped pattern, we found that productivity declined for the first 30 years of our study period. But more recently, the rapid pace of technological change has outpaced depletion and productivity has increased rapidly, particularly in most recent 5 years of our study period. We also provide a more thorough understanding of different components of technological change and depletion. JEL codes: D24, Q32, L71