Oil Find Inflation

August 28, 2013 in Daily Bulletin

Steve LeVine covered one of the quirkier aspects of oil company share prices:

  • If an oil company discovers an oilfield and claims that it is “significant” its share price will rise 0.4%. “Major” oilfields cause share prices to rise 0.6% and “giant” finds send prices up 1.1% – almost three times as much as significant ones.
  • Yet there is little correlation between the language used and the type of oilfield found.
  • Perhaps the rise in share price is why companies have become increasingly boastful about their oil finds.
  • Oil companies might also have become more boastful because they need to please their investors in a time when it has become increasingly expensive to explore new oil fields. “Giant” finds help justify the expense.

Read more about the study, see some graphs, and how recent the trend is over here.

Source: Quartz