The asymmetric relationship of oil prices and production on drilling rig trajectory

Nicholas Apergis (), Bradley Ewing and James Payne

Resources Policy, 2021, vol. 71, issue C

Abstract: With active drilling rigs essential for replenishing oil resources depleted through production, this study examines the potential asymmetries between drilling rig trajectory (vertical, directional, and horizontal), oil prices and oil production in the U.S. within a nonlinear autoregressive distributed lag framework. Based on weekly data, the results reveal long-run symmetry with respect to oil prices irrespective of drilling rig trajectory. However, there is long-run asymmetry for oil production consistent with the capital-intensive nature of drilling and the fixed costs associated with new wells. The results also show short-run asymmetry with respect to both oil prices and oil production consistent with companies taking advantage of upturns quickly and refraining from costly shut-in, plug and abandon, or increased expenditures on improved oil recovery during downturns.

Keywords: Drilling trajectory; Oil prices; Oil production; Asymmetries; NARDL (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:71:y:2021:i:c:s0301420721000076

DOI: 10.1016/j.resourpol.2021.101990

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