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Does oilrig activity react to oil price changes? An empirical investigation

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Author Info
Guro Børnes Ringlund, Knut Einar Rosendahl and Terje Skjerpen () (Statistics Norway)

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Abstract

In this paper we analyse how oilrig activity in different Non-OPEC regions is affected by the crude oil price. Oilrig activity outside OPEC is an important indicator for production in the near future, and is more sensitive to the oil price than production from existing fields. We estimate relationships between oilrig activity and crude oil prices using Equilibrium Correction Models (ECM) augmented with a stochastic time trend. The results generally show a positive relationship between oilrig activity and the crude oil price, but the strength of the relationship differs across regions. Rig activity in the US seems to react much faster and stronger to oil price changes compared to other regions. In the long-run the price elasticity in the US is above 1.5. Half the effect is observed after six months. In other regions the long-run elasticity is mainly between 0.5 and 1. Overall, it seems to be a clear relationship between the oil industry structure in the region and the reaction to price changes.

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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 372.

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Date of creation: Mar 2004
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Handle: RePEc:ssb:dispap:372

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Related research
Keywords: Oilrig Activity; Oil Prices; Equilibrium Correction Model; Stochastic trend;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
Q31 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Demand and Supply
Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  12. Lester C. Hunt & Yasushi Ninomiya, 2003. "Unravelling Trends and Seasonality: A Structural Time Series Analysis of Transport Oil Demand in the UK and Japan," The Energy Journal, International Association for Energy Economics, vol. 24(3), pages 63-96.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mohn, Klaus & Osmundsen, Petter, 2008. "Asymmetry and uncertainty in capital formation: An application to oil investment," UiS Working Papers in Economics and Finance 2009/13, University of Stavanger. [Downloadable!]
  2. Finn Roar Aune, Solveig Glomsrød, Lars Lindholt and Knut Einar Rosendahl, 2005. "Are high oil prices profitable for OPEC in the long run?," Discussion Papers 416, Research Department of Statistics Norway. [Downloadable!]
  3. Mohn, Klaus, 2009. "Elastic Oil. A primer on the economics of exploration and production," UiS Working Papers in Economics and Finance 2009/10, University of Stavanger. [Downloadable!]
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