Reference no: EM13881878
Wildcat activity. Wildcats are wells drilled to ?nd and produce oil and/or gas in an improved area or to ?nd a new reservoir in a ?eld previously found to be productive of oil or gas or to extend the limit of a known oil or gas reservoir. Table 7.7 gives data on these variables*:
Y = the number of wildcats drilled
X2 = price at the wellhead in the previous period (in constant dollars, 1972 = 100)
X3 = domestic output
X4 = GNP constant dollars (1972 = 100)
X5 = trend variable, 1948 = 1, 1949 = 2, ..., 1978 = 31
See if the following model ?ts the data:
Yt = β1 + β2 X2t + β3 ln X3t + β4 X4t + β5 X5t + ut
a. Can you offer an a priori rationale to this model?
b. Assuming the model is acceptable, estimate the parameters of the model and their standard errors, and obtain R2 and R¯ 2 .
c. Comment on your results in view of your prior expectations.
d. What other speci?cation would you suggest to explain wildcat activ- ity? Why?
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TABLE 7.7
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Domestic
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output
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Per barrel
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(millions of
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GNP,
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Thousands
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price,
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barrels
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constant
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of wildcats,
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constant $,
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per day),
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$ billions,
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Time,
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(Y )
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(X2)
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(X3)
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(X4)
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(X5)
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8.01
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4.89
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5.52
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487.67
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1948 = 1
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9.06
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4.83
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5.05
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490.59
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1949 = 2
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10.31
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4.68
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5.41
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533.55
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1950 = 3
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11.76
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4.42
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6.16
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576.57
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1951 = 4
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12.43
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4.36
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6.26
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598.62
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1952 = 5
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13.31
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4.55
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6.34
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621.77
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1953 = 6
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13.10
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4.66
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6.81
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613.67
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1954 = 7
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14.94
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4.54
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7.15
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654.80
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1955 = 8
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16.17
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4.44
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7.17
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668.84
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1956 = 9
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14.71
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4.75
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6.71
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681.02
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1957 = 10
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13.20
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4.56
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7.05
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679.53
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1958 = 11
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13.19
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4.29
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7.04
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720.53
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1959 = 12
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11.70
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4.19
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7.18
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736.86
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1960 = 13
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10.99
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4.17
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7.33
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755.34
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1961 = 14
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10.80
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4.11
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7.54
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799.15
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1962 = 15
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10.66
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4.04
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7.61
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830.70
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1963 = 16
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10.75
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3.96
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7.80
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874.29
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1964 = 17
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9.47
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3.85
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8.30
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925.86
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1965 = 18
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10.31
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3.75
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8.81
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980.98
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1966 = 19
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8.88
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3.69
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8.66
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1,007.72
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1967 = 20
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8.88
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3.56
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8.78
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1,051.83
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1968 = 21
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9.70
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3.56
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9.18
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1,078.76
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1969 = 22
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7.69
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3.48
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9.03
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1,075.31
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1970 = 23
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6.92
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3.53
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9.00
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1,107.48
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1971 = 24
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7.54
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3.39
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8.78
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1,171.10
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1972 = 25
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7.47
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3.68
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8.38
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1,234.97
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1973 = 26
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8.63
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5.92
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8.01
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1,217.81
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1974 = 27
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9.21
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6.03
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7.78
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1,202.36
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1975 = 28
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9.23
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6.12
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7.88
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1,271.01
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1976 = 29
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9.96
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6.05
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7.88
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1,332.67
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1977 = 30
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10.78
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5.89
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8.67
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1,385.10
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1978 = 31
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Source: Energy Information Administration, 1978 Report to Congress.
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