Since the advent of the Shale Revolution, the U.S. has experienced a massive surge in oil, gas and NGL production — creating a bonanza of opportunities. But the attitudes of energy companies, owners and investors have shifted from “drill-baby-drill” to a focus on returning value to shareholders. It’s an evolution reminiscent of the economic concept known as the product life cycle. And that got us thinking. In today’s RBN blog, we’ll discuss the introduction, growth and maturity phases of the Shale Revolution, assess where we are today, and explore a couple of potential paths forward.
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The product life cycle is a concept in economics that broadly describes the phases that new products often experience from the time that they come to market until their eventual decline. It’s an evolution we can liken to the run-up and subsequent tapering of domestic crude oil production (see Figure 1 below). Before we get started, we should acknowledge that we’re not perfectly analogous here because oil and gas supply curves are dictated by producer economics and the rate at which new wells replace older declining wells. However, while it’s not an exact corollary — a commodity is not a product type in the sense that a smartphone is — we think it will be instructive to view unconventional drilling through the lens of a technology-based product play.
We should also note that our analogy includes unconventional production as well as the midstream and downstream sectors that have been directly impacted. In an industry as pervasive and well developed as energy, vertical sectors are mutually dependent. For example, new production growth is contingent on midstream facilities while they, in turn, are anchored on production and throughput expectations. Likewise, downstream facilities, like refineries, rely on midstreamers’ efficient delivery systems.
Further, although the product life cycle has gained widespread recognition as a useful framework as companies strategize ways to market and sell products, there is no universally agreed-upon standard of phases, as they have been redefined over time. For this blog, we will consider four stages: Introduction, Growth, Maturity and Decline/Extension.
Figure 1. The Product Life Cycle Compared to U.S. Crude Market Phases. Source: RBN
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About the song
“Black Cow” was written by Walter Becker and Donald Fagen and appears as the first song on side one of Steely Dan’s sixth studio album, Aja. The song would be released as the B-side of the single “Josie” in August 1978. The tune exemplifies Steely Dan’s move away from any trace of rock and roll to a smooth jazz format featuring solos from a tenor saxophone and Fender Rhodes electric piano. Personnel on the record were: Donald Fagen (lead vocals, synthesizer), Chuck Rainey (bass), Paul Humphrey (drums), Victor Feldman (Fender Rhodes piano), Joe Sample (Clavinet), Larry Carlton (guitar), Tom Scott (tenor saxophone), and Clydie King, Venetta Fields, Sherlie Matthews, Rebecca Lewis (backing vocals).
Aja was recorded between November 1976 and July 1977 at Village Recorder, ABC in Los Angeles, Producer’s Workshop, Sound Labs in Hollywood, Warner Bros. in Burbank, and A&R in New York City. It employed over 40 session musicians during its making. Produced by Gary Katz, the album was released in September 1977 and went to #3 on the Billboard 200 Albums chart. It has been certified 2x Platinum by the Recording Industry Association of America. The album won a Grammy Award for Best Engineered Recording-Non-Classical in 1978. Three singles were released from the LP.
Steely Dan is an American rock band formed in Annandale-on Hudson, NY, in 1971 by Walter Becker and Donald Fagen. The two met and started playing together while attending Bard College in the late 1960s. After moving to Los Angeles in 1971, they put together the band which would become Steely Dan. The name comes from a device named in William Burroughs’ 1959 novel, Naked Lunch. Originally a full band, the duo quit performing live and became a studio-only group in 1974. After disbanding in 1981, Becker and Fagen reunited and put a band back together in 1993. They have released nine studio albums, two live albums, 12 compilation albums, and 22 singles. Eight members have passed through the band since its formation. After the death of founding member Walter Becker in 2017, Donald Fagen continues to record and tour as Steely Dan.
