The New Paradigm - Federal Reserve Bank of Dallas

14
Exhibit 8
Barrels of Savings
Using 3-D seismic exploration technology, Amoco has cut the cost
of finding oil from nearly $10 per barrel in 1991 to under $1 today.
The 3-D seismic process reflects sonic waves off underground rock
formations, hydrocarbons and other minerals to produce a threedimensional
image of the subsurface and better predict where oil
resides. Computer programs and modeling techniques acquire
data along multiple subsurface grids and correlate it with historical
production numbers to forecast the likelihood of oil and natural gas
reserves. Ten years ago, a detailed survey would average just
24,000 traces of seismic data, but today’s supercomputers yield
28 million—an increase of more than a thousandfold. Other technologies
have helped cut drilling costs. Baker Hughes’ AutoTrak, for
example, is a smart downhole guidance system that continuously
keeps the drill bit within one meter of its preprogrammed course.
Geosteering has cut rig operating costs as much as 55 percent.
Price per barrel of oil equivalent
$12
$10
$8
$6
$4
$2
$0
’91
’92
’93
’94
’95
’96
Moving the nation’s output of goods and services from producers to
consumers is an expensive undertaking, costing billions of dollars annually.
Wal-Mart alone racked up 600 million route miles in 1999, making
1.2 million deliveries to its nearly 3,000 stores. How does modern
computer technology cut costs? Three years ago Wal-Mart purchased
mobile communication sets for its 4,300 tractors from HighwayMaster
Corp. of Richardson, Texas. The units include an on-board computer
featuring a global positioning system, a voice-activated cell phone and
a Cellemetry data transceiver, monitoring each truck’s location, load
weight, speed, gas consumption, odometer miles, idling time and more.
Trucks roll empty less often, fewer dispatchers are needed, gas mileage
is cut, trailer theft is down, idling time is reduced, records automatically
accrue and driver turnover falls. Total cost savings are up to 20 percent
in some cases. When applied to the 6 million to 8 million detachable
trailers in the United States, the savings could be huge.
Wal-Mart, the nation’s largest retailer, cut up to 20 percent
off the cost of operating a delivery truck by installing
computers, global positioning gear and cell phones in 4,300
vehicles. Supercomputers produce a thousandfold improvement
in seismic data, allowing BP Amoco to find oil for
under $1 a barrel, down from nearly $10 a barrel in 1991.
(See Exhibit 8.) Processing an Internet transaction costs a
bank just a penny, compared with $1.14 with a pen, paper
and teller. (See Exhibit 9.)
Cutting direct costs means consumers pay lower prices.
At home, too, microprocessors are saving Americans
money. Computer chips are now tucked inside just about
every home appliance—from coffeemakers to garage door
openers. Since 1972, for example, chips have helped
reduce energy consumption by 36 percent for room air
conditioners, 42 percent for clothes washers, 50 percent
for dishwashers, 61 percent for freezers and 67 percent for
refrigerators. (See Exhibit 10.)
1999 ANNUAL REPORT Federal Reserve Bank of Dallas