Growth through acquisition
In the 1980s, Shell grew through acquisition. It bought out the remaining 30% shareholding in Shell Oil in 1985 to consolidate its American operations. This was a period of consolidation across the industry through mergers and acquisitions, a necessary move in the face of difficult trading conditions. Shell also sold down its stockpile, anticipating, to some extent, the coming weakness in the oil price.
Plummeting oil prices
In 1986 the oil price collapsed. OPEC lost power in the market place as other non-OPEC sources came on-stream, including output from the North Sea. It had initially tried to ignore price pressures through cutting production but it abandoned this strategy in late 1985 and decided to increase production. The price fell over the winter from $31 per barrel to $10.
After years of living with a high oil price the Shell group had to adjust to low prices, requiring a change in the way it judged investment projects. The budget was halved within two years: the company had to work much harder to develop new projects more cheaply. Intensive research led to huge improvements in drilling techniques such as slim-hole drilling and directional drilling. The use of 3D seismic technology in the search for new oil resources became widespread.