Figure S1. Log (rig activity) and log(real oil price). US 6 5 4 log (rig activity) log (real oilprice) 3 1 0 1 1990 1995 000 005 1
Figure S. Log (rig activity) and log(real oil price). Canada 5 log (rig activity) log (real oilprice) 4 3 1 0 1 1990 1995 000 005
Figure S3. Log (rig activity) and log(real oil price). Europe 4 log (rig activity) log (real oilprice) 3 1 0 1 1990 1995 000 005 3
Figure S4. Log (rig activity) and log(real oil price). Latin America 5 4 log (real activity) log (real oilprice) 3 1 0 1 1990 1995 000 005 4
Figure S5. Log (rig activity) and log(real oil price). Latin America without OPEC 5 log (rig activity) log (real oilprice) 4 3 1 0 1 1990 1995 000 005 5
Figure S6. Log (rig activity) and log(real oil price). Asia Pacific 5 log (rig activity) log (real oilprice) 4 3 1 0 1 1990 1995 000 005 6
Figure S7. Log (rig activity) and log(real oil price). Middle East without OPEC log (rig activity) log (real oilprice) 4 3 1 0 1 1990 1995 000 005 7
Figure S8. Log (rig activity) and log(real oil price). Africa 4 log (rig activity) log (real oilprice) 3 1 0 1 1990 1995 000 005 8
Figure S9. Log (rig activity) and log(real oil price). Africa without OPEC 3 log (rig activity) log (real oilprice) 1 0 1 1990 1995 000 005 9
Selected references related to the econometric part of the paper Bowman, K.O., Shenton, L.R., 1975. Omnibus test contours for departures from normality based on b 1 and b. Biometrika 6, 43-50. Dezhbakhsh, H., 1990. The inappropriate use of serial correlation tests in dynamic linear models. Review of Economics and Statistics 7, 16-13. Doornik, J.A., Hansen, H., 1994. An omnibus test of univariate and multivariate normality. Discussion paper. Nuffield College, Oxford. Harvey, A.C., Henry, S.G.B., Peters, S., Wren-Lewis, S., 1986. Stochastic trends in dynamic regression models: an application to the employment-output equation. Economic Journal 96, 975-985. Harvey, A.C., 1989. Forecasting, structural time series models and the Kalman filter. Cambridge University Press, Cambridge. Hunt, L.C., Ninomiya, Y., 003. Unravelling trends and seasonality: a structural time series analysis of transport oil demand in the UK and Japan. Energy Journal 4 (3), 63-96. Koopman, S.J., Harvey, A.C., Doornik, J.A., Shephard, N., 1999. Stamp: structural time series analyser, modeller and predictor. Timberlake Consultants Ltd., London. 10
Modeling framework ()B(L)yt = C(L)xt + kmt +µ t + s t +ε t, i (3)B(L) 1 b L p = i1 = q i (4)C(L) = cil. i= 0 (5) µ t = µ t 1+ β t 1+η t (6) β t = β t 1+ν t i 11 (7) s j= 0 t j = ξ t ( ) / (8) εt, ηt, νt, ξt ~ NIID(0,diag σεε, σηη, σνν, σ ξξ ) t. 11
j1 {j} (9) x t = (1/ j) x i= 0 t i (10) B(L)y = D(L)x + km +µ + s +ε, {j} t t t t t t r i (11) D(L) = d il, i= 0 1
State space form (1) B(L)y = D(L)x + km + Az +ε, {j} t t t t t (13) z t = Vz t 1+ς t, [ ] / z = µ, β, s, s, s t t t t t 1 t 10 1 1 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 (14) V = 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0, 13
ˆ (15)AIC= log( σ ) + (/T)(nk + nh + n z) ˆ (16)BIC = log( σ ) + (log(t)/ T)(n k + nh + n z), 14
The regions, for which we consider econometric modeling, consist of the following countries (an asterisk* refers to OPEC countries): United States Canada Europe: Denmark, France, Germany, Netherlands, Hungary, Italy, Norway, Poland, Romania, Turkey, United Kingdom, Yugoslavia, "others". Non-OPEC Middle East: Egypt, Oman, Pakistan, Sudan, Syria, Yemen, "others". Latin America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Trinidad, Venezuela*. Africa: Algeria*, Angola, Congo, Gabon*, Libya*, Nigeria*, South Africa, Tunisia, "others". Asia Pacific: Australia, Brunei, India, Indonesia*, Japan, Malaysia, Myanmar, New Zealand, Offshore China, Papua New Guinea, Philippines, Taiwan, Thailand, Vietnam, "others". 15
Oil prices used for different regions: United States: Canada: Europe: Latin America: "United States West Texas Intermediate" "United States West Texas Intermediate" "Brent Blend" "United States West Texas Intermediate" Latin America without OPEC: "United States West Texas Intermediate" Asia Pacific: Middle-East without OPEC: Africa: Africa without OPEC: "Dubai" "Dubai" "Nigeria" "Nigeria" 16
Table A1. Ranking of simplified versions of models M 3, M 6, M 1 and M 4 according to Akaike's information (AIC) and the Bayesian information criterion (BIC) ab Region: Inform. M 3 M 6 M 1 M 4 criterion US AIC 3 1 4 BIC 3 1 4 Canada AIC 1 3 BIC 1 3 Europe AIC 3 1 4 BIC 4 1 3 Latin America AIC 1 4 3 BIC 1 3 4 Latin America without OPEC AIC 3 1 4 BIC 4 1 3 Asia Pacific AIC 1 BIC 1 Middle East without OPEC AIC 4 3 1 BIC 3 4 1 Africa AIC 3 4 1 BIC 3 4 1 Africa without OPEC AIC 3 4 1 BIC 3 4 1 a Lowest number indicates best model. 17
Table 1. Characteristic features of the preferred model for the different regions Region Smoothing over number of months Trend specification: restrictions Specification of seasonality: restrictions Dummy variable US 1 β t = 0 t σ ξξ = 0 DI00.1 Canada 3 σ νν = 0 None None Europe 6 β t = 0 t s t = 0 t DI99.10 Latin America 3 µ t = µ t s t = 0 t DI0.4 Latin America 1 β t = 0 t s t = 0 t None without OPEC Asia Pacific 4 β t = 0 t s t = 0 t None Middle East 4 β t = 0 t s t = 0 t DS06.1 without OPEC Africa 4 β t = 0 t s t = 0 t DS0. Africa without 1 β t = 0 t σ ξξ = 0 None OPEC 18
List of dummy variables: USA: D00.1 Impulse dummy: Insecurity surrounding the new millennium Europe: D99.10 Impulse dummy: No substantial interpretation Latin America: D0.4 Impulse dummy: Coup d'état against president Hugo Chavez Middle East without OPEC: DS06.1 Step dummy related to the civil war in Sudan Africa: DS0.. Redefinition of variables related to Algeria and Libya 19
Table. Overview of different diagnostics and fit measures Statistic/ Fit Explanation Distribution meas. NORM-DH The Doornik and Hansen (1994) adjusted version of the Bowman-Shenton (1975) test statistic for normality. HET A test statistic for heteroskedasticity, cf. Koopman et al. (000, p. 183) BJ-Q The Box-Ljung Q- statistic of residual autocorrelation, cf. Koopman et al. (000, p. 18) χ -distributed with degrees of freedom F-distributed with h degrees of freedom in both the numerator and denominator, where h corresponds to about one third of the standardized one-stepahead prediction errors χ -distributed with P-n h +1 degrees of freedom, where P denotes the number of autocorrelations and n h the number of estimated hyperparameters (variances) 0
Table (continued) NORM-BS- The Bowman-Shenton IRR (1975) statistic for normality of the auxiliary residuals related to the genuine NORM-DH- IRR NORM-BS- LEV NORM-BS- LEV error term The Doornik-Hansen (1994) statistic for normality of the auxiliary residuals related to the genuine error. The Bowman-Shenton (1975) statistic for normality of the auxiliary residuals related to the innovations in the stochastic trend component The Doornik-Hansen (1994) statistic for normality of the auxiliary residuals related to the innovations in the stochastic trend component χ -distributed with degrees of freedom χ -distributed with degrees of freedom χ -distributed with degrees of freedom χ -distributed with degrees of freedom 1
Table (continued). R Coefficent of determination, cf. Koopman et al. (000, p. 179) R D R S Coefficent of determination, taking into account trend movement in the modeled variable, cf. Koopman et al. (000, p. 179) Coefficent of determination, taking into account trend movement and seasonal fluctuations in the modeled variable, cf. Koopman et al. (000, p. 180)
Table 3. Econometric results for oilrig activity in US a Variable Estimate t-value Variance ratio, diagnostics and fit Diagnostics related to auxiliary residuals y t-1 0.69553 10.844 ση / σ 0.931 NORM- 0.0451 ε BS-IRR y t- -0.3193-5.1359 Std. error 0.054 NORM- DH-IRR 0.041 {1} p 0.79184 5.9947 NORM- 0.588 t DH DI00.1-0.109 -.4788 HET b 0.034 NORM- 0.494 BS-IRR BJ-Q c 0.159 Long-run elasticity 1.70 R 0.886 s 0.3578 NORM- DH-IRR a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimates of fixed seasonal effects are not reported. Estimation sample 1987M10-006M5. b The number of degrees of freedom is 74 both for the numerator and the denominator. c The number of degrees of freedom is 1. 3
Figure R1. Residuals. US 3 US 1 0 1 1990 1995 000 005 4
Figure TR1. Extracted stochastic trend. US 5.4 US 5. 5.0 4.8 4.6 4.4 4. 1990 1995 000 005 5
Table 4. Econometric results for oilrig activity in Canada a Variable Estimate t-value Variance ratios, diagnostics and fit Diagnostics related to auxiliary residuals {3} pt 1.8605 5.6985 1 Longrun elasticity 1.8605 σε / σ 0.315 NORMη BS-IRR σ / σ 0.0709 NORM- ξ η Std. error 0.1677 NORM-DH HET b BJ-Q c R s 0.104 DH-IRR 0.3715 NORM- BS-IRR 0.7633 NORM- DH-IRR 0.816 0.4713 0.4376 0.917 0.7481 a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimate of linear deterministic trend is not reported. Estimation sample 1998M3-006M5. b The number of degrees of freedom is 8 both for the numerator and the denominator. c The number of degrees of freedom is 6. 6
Figure R. Residuals. Canada.0 1.5 Canada 1.0 0.5 0.0 0.5 1.0 1.5.0 000 001 00 003 004 005 006 7
Figure TR. Extracted stochastic trend. Canada 8.75 8.50 Canada 8.5 8.00 7.75 7.50 7.5 7.00 6.75 6.50 6.5 1999 000 001 00 003 004 005 006 8
Figure Seas1. Extracted seasonal component. Canada 0.4 0. 0.0 0. 0.4 0.6 0.8 Canada 1999 000 001 00 003 004 005 006 9
Table 5. Econometric results for oilrig activity in Europe a Variable Estimate t-value Variance ratio, diagnostics and fit Diagnostics related to auxiliary residuals y t-1 0.40978 5.085 ση / σ 0.0109 NORM- 0.015 ε BS-IRR (pvalue) y t- 0.34575 4.481 Std. error 0.0969 NORM- DH- IRR (pvalue) 0.0313 {6} pt 4 0.10853.044 NORM-DH 0.0795 DI99.10 Longrun elasticity -0.4554 -.568 HET b BJ-Q c 0.4439 R 0.049 NORM- BS-IRR (pvalue) 0.3157 NORM- DH- IRR (pvalue) 0.73101 0.103 0.079 a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimation sample 1995M3-006M5. b The number of degrees of freedom is 44 both for the numerator and the denominator. c The number of degrees of freedom is 9. 30
Figure R3. Residuals. Europe Europe 1 0 1 3 1996 1997 1998 1999 000 001 00 003 004 005 006 31
Figure TR3. Extracted stochastic trend. Europe 1.5 Europe 1.00 1.175 1.150 1.15 1.100 1996 1997 1998 1999 000 001 00 003 004 005 006 3
Table 6. Econometric results for oilrig activity in Latin America a Variable Estimate t-value Variance ratio, diagnostics and fit y t-1 0.9686 39.775 Std. error 0.0414 NORM- BS-IRR {3} pt 1 0.35836 3.853 {3} pt DI0.4 Longrun elasticity NORM-DH 0.745-0.4698 -.4539 HETb 0.354-0.0461-4.7133 BJ-Q c 0.9649 1.5 R 0.34310 d Diagnostics related to auxiliary residuals NORM- DH-IRR 0.6074 0.7117 a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Effect of linear deterministic trend is not reported. Estimation sample 1995M-006M5. b The number of degrees of freedom is 44 both for the numerator and the denominator. c The number of degrees of freedom is 10. 33
Figure R4. Residuals. Latin America.5.0 Residual LRIGA4 Latin America 1.5 1.0 0.5 0.0 0.5 1.0 1.5.0 1996 1997 1998 1999 000 001 00 003 004 005 006 34
Table 7. Econometric results for oilrig activity in Latin America without OPEC a Variable Estimate t-value Variance ratio, diagnostics and fit Diagnostics related to auxiliary residuals {1} pt 0.8019 4.66 σε / σ 0.793 NORM- 0.6399 η BS-IRR Std. error 0.0547 NORM- 0.3783 DH-IRR NORM-DH 0.5519 HET b BJ-Q c 0.9569 NORM- BS-IRR 0.6837 NORM- DH-IRR 0.7014 0.4514 Long-run 0.8019 R 0.95904 elasticity a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimation sample 1995M1-006M5. b The number of degrees of freedom is 45 both for the numerator and the denominator. c The number of degrees of freedom is 9. 35
Figure R5. Residuals. Latin America without OPEC 3 Latin America without OPEC 1 0 1 1996 1997 1998 1999 000 001 00 003 004 005 006 36
Figure TR4. Extracted stochastic trend. Latin America without OPEC 6.7 6.6 Latin America without OPEC 6.5 6.4 6.3 6. 6.1 6.0 5.9 1995 1996 1997 1998 1999 000 001 00 003 004 005 006 37
Table 8. Econometric results for oilrig activity in Asia Pacific a Variable Estimate t-value Variance ratio, diagnostics and fit Diagnostics related to auxiliary residuals y t-1 0.457 5.9038 ση / σ 0.1449 NORM- 0.9831 ε BS-IRR {4} pt 0.786.5438 Std. error 0.051 NORM- 0.908 1 DH-IRR NORM-DH 0.9785 HET b BJ-Q c 0.4106 NORM- BS-IRR 0.5563 NORM- DH-IRR 0.6034 0.656 Long-run 0.5090 R 0.89076 elasticity a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimation sample 1995M-006M5. b The number of degrees of freedom is 45 both for the numerator and the denominator. c The number of degrees of freedom is 9. 38
Figure R6. Residuals. Asia Pacific Asia Pacific 1 0 1 1996 1997 1998 1999 000 001 00 003 004 005 006 39
Figure TR5. Extracted stochastic trend. Asia Pacific 3.50 3.5 Asia Pacific 3.00 3.175 3.150 3.15 3.100 3.075 3.050 1996 1997 1998 1999 000 001 00 003 004 005 006 40
Table 9. Econometric results for oilrig activity in Middle East without OPEC a Variable Estimate t-value Variance ratio, diagnostics and fit {4} p 0.6016.994 t σε / σ 0.7769 NORMη BS-IRR DS06.1-0.9-4.583 Std. error 0.050 NORM- DH-IRR NORM- DH HET b BJ-Q c 0.0111 0.999 NORM- BS-IRR 0.3019 NORM- DH-IRR Diagnostics related to auxiliary residuals 0.183 0.0899 0.0001 0.0019 Long-run 0.6016 R 0.96456 elasticity a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimation sample 1995M1-006M5. b The number of degrees of freedom is 45 both for the numerator and the denominator. c The number of degrees of freedom is 9. 41
Figure R7. Residuals. Middle East without OPEC 3 Middle East without OPEC 1 0 1 3 1996 1997 1998 1999 000 001 00 003 004 005 006 4
Figure TR6. Extracted stochastic trend. Middle East without OPEC 5.60 Middle east without OPEC 5.55 5.50 5.45 5.40 5.35 5.30 5.5 5.0 5.15 1995 1996 1997 1998 1999 000 001 00 003 004 005 006 43
Table 10. Econometric results for oilrig activity in Africa a Variable Estimate t-value Variance ratio, diagnostics and fit Diagnostics related to auxiliary residuals {4} p 0.986 3.75 t ση / σ 0.6705 NORM- 0.0003 ε BS-IRR DS0. 0.5971 6.611 Std. error 0.0997 NORM- 0.0007 DH-IRR NORM- DH 0.001 HET b BJ-Q c 0.8355 NORM- BS-IRR 0.0413 NORM- DH-IRR 0.0008 0.0038 Long-run 0.986 R 0.8784 elasticity a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Estimation sample 1995M1-006M5. b The number of degrees of freedom is 45 both for the numerator and the denominator. c The number of degrees of freedom is 9. 44
Figure R8. Residuals. Africa 3 Africa 1 0 1 3 1996 1997 1998 1999 000 001 00 003 004 005 006 45
Figure TR7. Extracted stochastic trend. Africa 5.6 5.4 Africa 5. 5.0 4.8 4.6 4.4 1995 1996 1997 1998 1999 000 001 00 003 004 005 006 46
Table 11. Econometric results for oilrig activity in Africa without OPEC a Variable Estimate t-value Variance ratio and diagnostics Diagnostics related to auxiliary residuals y t-1 0.46 5.86 ση / σ 0.074 NORM- 0.1040 ε BS-IRR {1} pt 0.379.0999 Std. error 0.16764 NORM- DH-IRR NORM- DH HET b BJ-Q c 0.0956 0.076 NORM- BS-IRR 0.0668 NORM- DH-IRR 0.1417 0.09 0.0606 Long-run 0.6497 R 0.14158 elasticity s a Cf. Table 1 for an explanation of diagnostic tests and fit measures. Fixed seasonal effects are not reported. Estimation sample 1995M-006M5. b The number of degrees of freedom is 45 both for the numerator and the denominator. c The number of degrees of freedom is 9. 47
Figure R9. Residuals. Africa without OPEC Africa without OPEC 1 0 1 3 1996 1997 1998 1999 000 001 00 003 004 005 006 48
Figure TR8. Extracted stochastic trend. Africa without OPEC.6.5 Africa without OPEC.4.3..1.0 1.9 1.8 1996 1997 1998 1999 000 001 00 003 004 005 006 49
Table 1. Estimated long-run elasticities for different regions Region: Long-run elasticity US 1.70 Canada 1.861 Europe 0.444 Latin America 1.5 Latin America without OPEC 0.80 Asia Pacific 0.509 Middle East without OPEC 0.60 Africa 0.983 Africa without OPEC 0.650 50
Figure 3. Price elasticities for oilrig activity over different periods of time after a sustained price increase for US, Canada, Europe, Latin America and Latin America without OPEC 1.75 1.50 1.5 1.00 0.75 0.50 0.5 US Europe Latin America without OPEC CAN Latin America 0 10 0 30 40 50 60 70 80 90 100 51
Figure 4. Price elasticities for oilrig activity over different periods of time after a sustained price increase for Asia Pacific, Middle East without OPEC, Africa, Africa without OPEC 1.0 0.9 0.8 Asia Pacific Africa Middle East without OPEC Africa without OPEC 0.7 0.6 0.5 0.4 0.3 0. 0.1 0 10 0 30 40 50 60 70 80 90 100 5
Further work Multivariate model with a set of regions. For instance common latent variables representing technology. Formal inference on variance of latent components. Recursive analysis (for US). Stochastic slope parameters (STAMP 7). Forecasting. 53