The objective of this paper is to examine the responsiveness to price incentives of petroleum exploration, the generation of proven reserves and the production out of reserves in the United States. First, a theoretical framework of oil extraction and supply is developed. Next, an econometric model consisting of 11 stochastic equations and identities represents the decision processes affecting the supply of new discoveries, the increase of proven reserves and the production out of reserves. The parameters of the structural relationships are simultaneously determined and are estimated by three-stage least squares. Finally, the sample-period performance and predictability of the model are evaluated.