The relationship between crude oil prices, oil exploration and development, andcrude oil supply

Although extreme oil price movements are no rare events, the price movements
witnessed most recently – the record high in 2008 and the dramatic decline of
2014 – still stand out. Research into their causes clearly indicates that they can be
fundamentally explained and that speculation played only a minor role: the 2003-
2008 oil price increase can be attributed to unexpected increases in world oil
consumption driven by the global business cycle. Additional factors are a low
price elasticity of demand and the failure of physical production to increase.
Similar fundamental factors also explain the 2014 oil price decline: it is a
consequence of, first, a slowing global economy and, second, higher than expected
current and future crude oil production. These findings gain particular importance
as very recent research on the micro level indicates that oil exploration
investments rather than crude oil production respond to oil price increases.

The aim of this research project is to deepen the understanding of the
relationship between crude oil prices, oil exploration and crude oil supply. The
project consists of two parts: The first part of the project is concerned with a
detailed analysis of the relationship between oil price changes and exploration
activity. In particular the effect of oil price declines are not very well understood
as historically oil price decreases occurred considerably less often than oil price
increases. This research involves applications of advanced theoretical and
empirical methods; the empirical analysis will use global as well as regional
crude oil market data. The second part of this project analyses the relationship
between exploration activities and future crude oil production; it will be carried
out in cooperation with University of Aberdeen Department of Geology and
Petroleum Geology as well as University of Aberdeen Petroleum and Natural Gas
Engineering Research Group.

Applicants interested in this research project should submit a more detailed research proposal (of a maximum of 2000 words) that expands on the broad outline given abroad.