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
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
output
|
|
|
|
Per barrel
|
(millions of
|
GNP,
|
|
Thousands
|
price,
|
barrels
|
constant
|
|
of wildcats,
|
constant $,
|
per day),
|
$ billions,
|
Time,
|
|
(Y )
|
(X2)
|
(X3)
|
(X4)
|
(X5)
|
|
8.01
|
4.89
|
5.52
|
487.67
|
1948 = 1
|
|
9.06
|
4.83
|
5.05
|
490.59
|
1949 = 2
|
|
10.31
|
4.68
|
5.41
|
533.55
|
1950 = 3
|
|
11.76
|
4.42
|
6.16
|
576.57
|
1951 = 4
|
|
12.43
|
4.36
|
6.26
|
598.62
|
1952 = 5
|
|
13.31
|
4.55
|
6.34
|
621.77
|
1953 = 6
|
|
13.10
|
4.66
|
6.81
|
613.67
|
1954 = 7
|
|
14.94
|
4.54
|
7.15
|
654.80
|
1955 = 8
|
|
16.17
|
4.44
|
7.17
|
668.84
|
1956 = 9
|
|
14.71
|
4.75
|
6.71
|
681.02
|
1957 = 10
|
|
13.20
|
4.56
|
7.05
|
679.53
|
1958 = 11
|
|
13.19
|
4.29
|
7.04
|
720.53
|
1959 = 12
|
|
11.70
|
4.19
|
7.18
|
736.86
|
1960 = 13
|
|
10.99
|
4.17
|
7.33
|
755.34
|
1961 = 14
|
|
10.80
|
4.11
|
7.54
|
799.15
|
1962 = 15
|
|
10.66
|
4.04
|
7.61
|
830.70
|
1963 = 16
|
|
10.75
|
3.96
|
7.80
|
874.29
|
1964 = 17
|
|
9.47
|
3.85
|
8.30
|
925.86
|
1965 = 18
|
|
10.31
|
3.75
|
8.81
|
980.98
|
1966 = 19
|
|
8.88
|
3.69
|
8.66
|
1,007.72
|
1967 = 20
|
|
8.88
|
3.56
|
8.78
|
1,051.83
|
1968 = 21
|
|
9.70
|
3.56
|
9.18
|
1,078.76
|
1969 = 22
|
|
7.69
|
3.48
|
9.03
|
1,075.31
|
1970 = 23
|
|
6.92
|
3.53
|
9.00
|
1,107.48
|
1971 = 24
|
|
7.54
|
3.39
|
8.78
|
1,171.10
|
1972 = 25
|
|
7.47
|
3.68
|
8.38
|
1,234.97
|
1973 = 26
|
|
8.63
|
5.92
|
8.01
|
1,217.81
|
1974 = 27
|
|
9.21
|
6.03
|
7.78
|
1,202.36
|
1975 = 28
|
|
9.23
|
6.12
|
7.88
|
1,271.01
|
1976 = 29
|
|
9.96
|
6.05
|
7.88
|
1,332.67
|
1977 = 30
|
|
10.78
|
5.89
|
8.67
|
1,385.10
|
1978 = 31
|
Source: Energy Information Administration, 1978 Report to Congress.