In this study I apply the theory that changing energy prices induce innovation to producers of energy, specifically the oil and gas industry. Using pricing, production and patent data from 1980 – 2011, I model the share of total patents that are applicable to oil and gas as a function of expected future commodity prices, production of each commodity and previous stock of knowledge. In the building of the model, I develop knowledge stock variables and expected future prices specific to the industry. I find a significant, positive and highly elastic correlation between expected commodity prices and innovation, that is in line with previous work and the induced innovation theory.
