Tuesday, October 19, 2004

Oil Prices and Rig Counts

The charts from yesterday's post inspired me to map oil prices onto the US Rig Count Chart. Keep in mind the chart below reflects inflation adjusted oil prices.

Data provided by Baker Hughes, Inc. and inflationdata.com

Record highs in oil prices and rig counts occurred the same year...1981. While the record low in oil prices struck in 1972...one year after the record low in rig counts.

Oil prices have risen 130% since their 1998 bottom. While rig counts have only risen 28% since their 1999 bottom. Compare this to 1978 when oil prices rose 70% from their 1972 bottom and rig counts rose 140% from their 1971 bottom.

My father worked as a field engineer for Schlumberger back in the 60's, 70's, & 80's. He remembers quite fondly the various mom and pop oil companies that popped up in those days. Very similar to the dot com's of the 90's.

Most of the mom and pop drillers are long gone. The remaining companies are hesitant to increase drilling dollars for what they believe is a temporary situation in oil prices. The longer oil prices remain over $40/barrel...the less hesitant these companies become. Until then be prepared for higher oil prices.

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