A Rough Measure Of Increased Prices Inducing Entry

One of the most important dynamics in market processes is how high prices induce suppliers to either enter the market or, if they’re already in the market, to invest in expanding their production capacity to capture the profits available due to higher prices. In the current environment with high and volatile oil prices, you’d expect some investment in exploration and drilling, especially in the US and Canada. And indeed, the number of exploratory rigs in the US and Canada has increased. Interestingly, the number in the Gulf of Mexico has decreased, while the most substantial increases in exploratory activity in North America are in Oklahoma and New Mexico.