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

In this paper, we analyze how oilrig activity in different non-OPEC regions is affected by the crude oil price. We estimate relationships between oilrig activity and crude oil prices using dynamic regression models augmented with latent components capturing trend and seasonality. The results generally show a positive relationship between oilrig activity and the crude oil price, but the strength of the relationship differs across regions. Overall, there seems to be a clear relationship between the oil industry structure in the region and the oilrig activity's reaction to price changes. On average, the long-run price elasticity for oilrig activity in non-OPEC countries is around unity. (c) 2007 Elsevier B.V. All rights reserved.