In these conditions, "it's hard to think of a sector of the industry that has been helped by low crude prices," says Edward H. Murphy of the American Petroleum Institute.
Major oil companies have coped by selling off marginal oil wells, getting rid of thousands of employees and moving the hunt for new oil overseas. Industrywide, earnings of the 300 largest publicly traded U.S. petroleum companies plunged 37% in 1992. Chevron even put its historic San Francisco headquarters on the block.
In the convulsive transformation, even the most efficient operations are being squeezed and squeezed again as U.S. companies learn to live with low-priced crude.
In the bare-dirt hills outside Bakersfield, Texaco Inc. is eking out every barrel of oil it can from its Kern River tract, the company's largest producing field in the United States. The giant Kern River field--an "elephant" in oil world lingo--was discovered in 1899.
Long ago, the easy oil was brought up. Now what remains of the syrupy, low-value crude must be heated with massive injections of 450-degree Fahrenheit steam before it can be recovered.
The field's 4,500 producing wells are measured by a computerized system weekly. Each well's production, valued at current crude oil prices, is compared to the costs of running the well. If a well isn't making money, Texaco shuts it down and tweaks the steam system until it does.
"It's almost an oil factory," says Doug K. Carriger, Texaco's producing-division manager for Bakersfield.
But despite such efficiency, low crude prices have brought a new round of cost-cutting measures to the Kern River field. Of 480 jobs, 146 will be eliminated by February as the company farms out the field's well-servicing work to private contractors.
"If it's not coming in the front door," Texaco CEO Alfred C. DeCrane says of oil economics in the 1990s, "you've got to continue to look for ways to keep it from flowing out the back door--with cost controls, improved operating procedures, technological advantages."
By applying such tactics, most big companies are rallying. (This year's third-quarter profits at six big U.S. oil companies rose a combined $137 million.) But many small refiners still bob in and out of production, or slip into bankruptcy, as prices take a brief turn for better or worse. Gasoline marketers are also struggling--abandoning marginal markets and selling, trading or closing service stations.
Los Angeles, the world's largest gasoline retail market, now has about half the service stations it did in 1974. Of the 1,500 that Unocal operated in California in 1991, almost 300 have been shut down. Exxon plans to pull out of Los Angeles completely.
Even recent growth in automobile use is not helping the stations. Though driving increased as much as 2.5% in the first six months of 1993, according to the American Petroleum Institute, gasoline consumption grew by a barely perceptible 1% because of the increased efficiency of newer cars.
"What you have is a pie that isn't growing," says David L. Morehead, a vice president of the Petroleum Marketers Assn. of America. "These marketers would cut each others' hearts out to get increased market share."
Mary Jane Wilson, president of WZI Inc., a small Bakersfield oil field services firm, isn't banking on a revival of the U.S. oil industry. She's looking for other work.
Wilson has steered her 35-employee company from a 90% reliance on oil field engineering contracts to a 90% dependence on non-oil jobs.
"For us it's been a dramatic change," she says. Yet the engineering tasks have not been as large a leap. Her specialty, multiphase fluid flow, is not only central to the petroleum business, it is the process by which air and ground water pollution spreads--or how nutrients pass through the walls of the human vein.
"The whole world is multiphase fluid flow," Wilson says hopefully.
Entrepreneurs in alternative energy have also faced their days of reckoning in the California sun. Some of these technologies have been outmatched by their low-cost oil competitor. Others have matured or sought niches and kept in the running.
"That the alternative energies are still here is a testament to their resiliency," says V. John White, who heads the Coalition for Energy Efficiency and Renewable Technologies in Sacramento.
One clear survivor is wind energy, which has become so practical that in California alone it now produces twice the residential electrical demand of San Francisco--2% of the state's needs. Utilities in states from Oregon to Maine are looking into wind power.
But in the Southern California desert, at an energy and transportation crossroads along Santa Fe Street outside Daggett, there sits an oversized showcase of alternative energy schemes, some of them the worse for the wear.