Monday, May 11, 2009
This chart may help explain why oil prices are rising this year. Drilling activity typically responds to significant changes in oil prices. The red line is the number of active drilling rigs around the world, while the blue line is the inflation-adjusted price of oil. Recently, drilling activity appears to have dropped by more than one might suspect (down 42% in the past seven months), given the historical relationships depicted in the chart. Note that significant exploration activity in the early 1980s set the stage for a big drop in the price of oil in 1986. A lack of significant expoloration activity in recent years probably contributed to the big rise in prices last year.
Posted by Scott Grannis at 8:42 AM