A0392
Title: Going upstream: Responses of drilling activity to global oil markets
Authors: Wenqi LI - Chongqing University (China) [presenting]
Bao Nguyen - University of Tasmania (Australia)
Abstract: Understanding supply responses in the oil market and guiding strategic decisions in the energy sector is crucial, with drilling activity playing a key role. To analyze the dynamic adjustments of drilling operations to market signals, particularly oil price shocks, experiments are conducted using an innovative methodological approach that integrates oil stocks both above and below ground. A structural vector autoregressive (SVAR) model, augmented by Bayesian methodology, is employed. The analysis reveals the pronounced sensitivity of drilling activity to these shocks, highlighting the critical role of subterranean oil stocks, which significantly influence market expectations and pricing structures. Counterfactual analysis of scenarios, such as the COVID-19 pandemic and significant geopolitical disruptions, explores potential alternative trajectories of drilling activity under varying economic conditions, pinpointing crucial periods of deviation from projected drilling patterns. Furthermore, marked differences in drilling responses pre- and post-shale oil revolution are indicated, emphasizing the transformative impact of technological advancements on drilling methodologies.
