Crude oil prices and rig counts
Each week Baker Hughes releases a count of the number of active drilling rigs in the international oil and gas industry. Their data has been available for over sixty years and is regarded as a barometer for the oil services industry in particular as a lead indicator of demand for the capital equipment used in drilling, producing and processing hydrocarbons.
Why look at rig counts?
Partly because the number of active rigs might reflect a market-driven response to changes in oil and gas prices and also expectations of future price movements. When crude oil carries a high price in world markets, the profitability of drilling for oil from known reservoirs ought to improve and we might expect to see an expansion in the number of active rigs.
That said there are many factors that affect how many rigs are in operation – it is not simply a question of rigs changing in response to market demand for oil.
Technological change affects the number or rigs needed to develop a reservoir and also allows new known reserves to be exploited – for example the deepwater areas off the west coast of Africa.
Climatic conditions can affect the logistics of drilling schedules including the ability of oil producers to move rigs and establish new drilling sites.
Some reservoirs are only available for exploitation on time-limited leases – and as these leases come to an end, so more rigs might be brought into use.
Our chart shows that in recent years there has been a substantial rise in the world total of active oil rigs – indeed since 2002 the number has grown from around 2,000 to over 3,500 with the number of US-based rigs more than doubling although this figure is still less than half of the peak at the end of 1981.
I have added to the chart an index of global crude oil prices using the Goldman Sachs Commodity Index data series. To what extent do you think that the oil rig count reflects movements in global crude oil prices? Is the volume of active rigs a useful measure of the supply-side response to the recent boom in prices? And what impact might the sudden and dramatic fall in prices have on the number of rigs in operation as we head into 2009? The Times reports today that world crude oil demand will fall in 2009 for the first time since 1983.
blog comments powered by Disqus
Unit 3 Micro: Business Economics Key Term Glossary [2 Jun 2013]
Unit 3 Micro: Businesses Prospering During the Depression [13 May 2013]
Unit 1 Micro: Buffer Stocks (Revision) [20 Apr 2013]
Unit 1 Micro: Carbon Trading Scheme In Crisis [16 Apr 2013]
Unit 4 Macro: Taking the Pulse of Africa - Growth Outlook is Good [16 Apr 2013]
Economics at the Movies - Promised Land [7 Apr 2013]
Unit 1 Micro: Taxing Calories in Soft Drinks [5 Apr 2013]
Unit 4 Macro: Growth and Development in Angola [3 Apr 2013]
Unit 2 Macro: Inflation (April 2013 Update) [3 Apr 2013]
Unit 2 Macro: Revise and Test - AD and AS and GDP [30 Mar 2013]
Unit 2 Macro: Revise and Test - Aggregate Demand [28 Mar 2013]
Unit 2 Macro: Revise and Test - National Income [27 Mar 2013]
Unit 2 Macro: Revise and Test - The Circular Flow [27 Mar 2013]
Unit 4 Macro: Growth and Development in South Korea [13 Mar 2013]
Unit 1 Micro: Falling Car Use among Younger Drivers [18 Feb 2013]
Unit 2 Macro: Slow Export Growth Hampers UK Recovery [11 Feb 2013]
Unit 4 Macro: The UK Economy and the Euro [10 Feb 2013]
Paul Ormerod: Today Singapore and Japan, Tomorrow China [10 Feb 2013]
Unit 4 Macro: The UK Economy Outside of the Euro Area [4 Feb 2013]
Unit 3 Micro: Major tea exporters consider a new cartel [23 Jan 2013]
Unit 1 Micro: E-Bikes on Track for Surge in Demand [21 Jan 2013]
Unit 4 Macro: Fair Trade and Micro Finance - Spurs to Development? [20 Jan 2013]
Unit 4 Macro: Land Grabs and Development [18 Jan 2013]
Paul Ormerod: Meat and potato pies and the Nobel Prize in economics [10 Jan 2013]
Unit 4 Macro: GDP and PPP Adjustments [8 Jan 2013]
The Secret Diagram Club [4 Jan 2013]
Prospects for the UK Economy in 2013 [2 Jan 2013]
Unit 3 Micro: Top Firms Target the Rich [17 Dec 2012]
Unit 4 Macro: The effect of immigration on wages and prices [14 Dec 2012]
Economic Spinners [2 Dec 2012]
Price discrimination - car insurance [30 Nov 2012]
Unit 4 Macro: Growth in the Emerging Economies - Can It last? [25 Nov 2012]
Price Discrimination - How Technology makes it easier [17 Nov 2012]
Business and Consumer Behaviour - Some Discussion Questions [13 Nov 2012]
Unit 1 Micro: Denmark Drops the High Fat Food Tax [11 Nov 2012]
Unit 2 Macro: Classroom Exercise - Shifts in AD and AS [6 Nov 2012]
Paul Ormerod: Corporation tax: fostering the illusions of the electorate that someone else will pay [31 Oct 2012]
Unit 1 Micro: Making the Bus Cool! [26 Oct 2012]
Paul Ormerod: If it can happen to Google, who can feel safe? [24 Oct 2012]
Unit 2 Macro: Can UK Exporters Boost the Recovery? [24 Oct 2012]
Popping mad? [22 Oct 2012]
Unit 4 Macro: Perspectives on Natural Resource Curses [13 Oct 2012]
Unit 4 Macro: The Dutch Disease [9 Oct 2012]
Paul Ormerod: Ninja Turtles, Nick Clegg and Market Failure [4 Oct 2012]
Unit 1 Micro: Smartphone Penetration and Creative Destruction [26 Sep 2012]
Living Diagrams - Supply and Demand in Action! [21 Sep 2012]
Unit 2 Macro: UK Productivity Gap Grows [19 Sep 2012]
Unit 1 Micro: Prices in Action - Ticket Pricing at Derby County [17 Sep 2012]
Unit 4 Macro: Infrastructure Gaps and Development [17 Sep 2012]
Unit 1 Micro: Who Consumes the World’s Energy [16 Sep 2012]
Unit 4 Macro: Primary Export Dependence [15 Sep 2012]
Economic News 2-9 September 2012 [9 Sep 2012]
A2 OCR Transport - Derived Demand [6 Sep 2012]
Unit 1 Micro: Child Poverty 2012 - It Shouldn’t Happen Here [5 Sep 2012]
Unit 3 Micro: OFT Investigates the UK Retail Fuel Market [5 Sep 2012]
Unit 1 Micro: Difficult Times for UK Farmers [5 Sep 2012]
Unit 1 Micro: Helium Shortage might be a Party Pooper [27 Aug 2012]
Unit 1 Micro: Rising Wages and Demand for Robotics [20 Aug 2012]
Unit 1 Micro: Drought and US Corn Prices [8 Aug 2012]
Environmental Economics: Water Scarcity [6 Aug 2012]
Unit 3 Micro: Economics of the Milk Industry [12 Jul 2012]
Unit 3 Micro: Economics of the UK Water Industry [11 Jul 2012]
Unit 4 Macro: Malnutrition and Economics Development [8 Jul 2012]
Unit 4 Macro: Dambisa Moyo - Winner Take All [4 Jul 2012]
Unit 1 Micro: Australia launches carbon tax [1 Jul 2012]
Unit 4 Macro: Russian Government and Falling Oil Prices [17 Jun 2012]
Unit 2 Macro: High oil prices and consumer demand [17 Jun 2012]
End Depression Now! Paul Krugman at the LSE [30 May 2012]
Investment in Energy Infrastructure [23 May 2012]
Unit 2 Macro: Cyclical and Structural Economic Issues Facing the UK [23 May 2012]
Unit 3 Micro: Game Theory and Business Economics [21 May 2012]
Unit 2 Macro: The Current Account of the Balance of Payments [20 May 2012]
Unit 2 Macro: Positive and Negative Multiplier Effects [20 May 2012]
Unit 2 Macro: The Importance of Productivity [20 May 2012]
Unit 2 Macro: Measuring Inflation in the UK [20 May 2012]
Unit 2 Macro: Real Interest Rates [20 May 2012]
Q&A: What do we need to know about output gaps? [20 May 2012]
Unit 2 Macro: The Output Gap [20 May 2012]
Revision notes on unemployment [20 May 2012]
Unit 1 Micro: Revision Presentation on Elasticity of Demand [16 May 2012]
Unit 1 Micro: Revision Presentation on the Price Mechanism [16 May 2012]
Unit 1 Micro: Revision on Rice Prices [13 May 2012]
Unit 1 Micro: Price Elasticity of Supply [13 May 2012]
Unit 1 Micro: Income Elasticity of Demand [13 May 2012]
Unit 1 Micro: Price Elasticity of Demand [13 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 1 Micro: Revision Blogs on Markets and Intervention [10 May 2012]
Unit 1 Micro: Revision Quiz and Game on Market Prices [10 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Unemployment Glossary [5 May 2012]
Unit 2 Macro: Economic Cycle Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Unit 1 Micro: Climate Change Policies - Finding the Right Mix [30 Apr 2012]
Unit 1 Micro: Using the Cost-Benefit Principle [30 Apr 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 2 Macro: Britain back in Recession [29 Apr 2012]
Tullow Oil and African Development [25 Apr 2012]
Unit 1 Micro: Externalities - Deepwater Horizon 2 Years On [21 Apr 2012]
Unit 1 Micro: Revision Question on Road Tolls [17 Apr 2012]
AS & A2 Economics Revision / Exam Coaching Workshops Coming Up:
Monday 11 March 2013 - Portsmouth (Vue, Gunwharf Quays)
Wednesday 13 March 2013 - Fulham (Vue, Fulham Broadway)
Thursday 14 March 2013 - Stratford City (Vue, Westfield)
Friday 15 March 2013 - Bristol (Vue, Cribbs Causeway)
Monday 18 March 2013 - Birmingham (Vue, Star City)
Tuesday 19 March 2013 - Manchester (Vue, Salford Quays)
Thursday 21 March 2013 - Newcastle (Odeon, Metro Centre)
Friday 22 March 2013 - Leeds (Vue, The Light)
Monday 22 April 2013 - Stratford City (Vue, Westfield)
Join over 10,000 Economics teachers who receive our regular Economics Teacher Resource Newsletter:
