Year: 2025
Type: article
Abstract: ABSTRACT We use data on US onshore oil exploration to investigate the responsiveness of domestic production to oil price shocks; and the response of firm investment to uncertainty. Onshore oil exploration can be segmented into drilling wells and completing wells for production. Firms may delay their most substantial investment by drilling wells but leaving them uncompleted, creating wells which are Drilled but Uncompleted (DUCs). We analyze monthly data on well completions and DUCs to explore how firms adjust well completions in response to changes in oil prices and uncertainty about oil prices. We find that positive oil price shocks cause completed wells to increase and DUCs to decrease. We also find that uncertainty shocks induce drillers to delay their largest investment by increasing the ratio of DUCs to completions. Our results suggest that domestic producers use inventories of DUCs as a buffer to accelerate or delay well completions.
Source: Journal of Futures Markets
DOI: 10.1002/fut.22571
Authors: Asad Dossani, John Elder
Institution: Colorado State University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4407312421