Interesting, but its probably worth taking it that one stage further. If you look at the inflation adjusted oil price, and ignore the OPEC inspired shock of the 1970-80s then exponential does seem a good fit.

Drawing a smoothed curve by eye and the current run up doesn't look to be significantly like a spike; it looks like its part of the curve. Maybe $20 overshoot. True we can expect various shocks as the system readjusts, but they are as likely to be on up side as the down.

Anyone want to take this table and do a fit? I'm not sure I want to know what it says about 2012

Ugo I'd like to correct something, by far the most hunted whale species was the Sperm Whale. Its oil was of better quality and they also produced spermaceti, a liquid extracted from its brain. The Right Whale was the first species hunted by man on near shore excursions on rowing boats; by the second half of XVIII century the Right Whale population in the North Atlantic was probably already gone.

What made the Whale Industry was the Sperm Whale. They were hunted at high sea with heavy sailing ships (called whalers) that on sight of a whale pack would deploy to sea a number of rowing boats called whaleboats.

Each whaleboat had a typical crew of six members, four oarsmen, a harpooner and a ship's mate. Once on sea they would try to get close to the sperm whale the fastest they could, before it divided again in to the deep, with the mate aft at the helm and with the harpooner forward read to fire. When in range the harpooner would strike, trying to hit the whale on its back. If the harpoon was struck right, the sperm whale would then start a frenetic swim dragging the whaleboat by a cable connected to the harpoon. At this immense speed the harpooner and the mate would switch places (a manoeuvre that would sometimes end in tragedy) once forward the mate would try to get the whale boat close the its prey by pulling the cable and when again in range he would try to struck a series of spears towards the sperm whale's heart. Hence the animal would be killed by a ship's mate and not by a contracted man.

At its height (circa 1830 – 1860) the Whaling Industry was possibly the largest in the world and at a scale that never existed. The Whaler would set sail and entail several circumnavigation journeys, returning to home port only when the space to store oil barrels ran out. This would take between on average two to three years to accomplish but some commissions would take longer. Life was harsh and accidents were common,”a drop of blood for every litre of oil”.

Several harpoon types and a spear (second from the bottom).

All the crew members were contracted with the exception of the captain and the ship's mates (usually three). Each man would get paid only at the commission's end based on a pre-established fraction of the oil sale revenue, to which the expenses of keeping them aboard (feeding, etc) would be subtracted. While experienced men, like harpooners, could get as much as 1/20 of the revenues, inexperienced sailors could get below 1/200 of the share. This would invariable result in first timers ending up debtors to the contracting company, being forced to tackle one or more commissions to pay back.

Ugo, I don't know if you ever read Moby Dick, but it written there in black and white that whale hunting was peaking. The book was published in 1851 reflecting the knowledge Melville acquired during half a commission he took years earlier (he mutinied a year or so into it). At some point in the book he compares sperm whale hunting with the bison decimation that took place in North America. He argues that in first place in whale hunting only the less fit specimens are taken and secondly he observes that the sperm whales are answering to the hunt by travelling more in bigger packs and less solo, diminishing the odds of a whaler finding its prey. Using TOD's wording the easy sperm whales were over.

Melville correctly predicted that the Whale Industry would never ran out of sperm whales but was experiencing severe difficulties to keep catch rates of the past. Man has hunted the sperm whale more than any other whale, but still the species is one of the most abundant ones (circa 1 million specimens worldwide) which in relative terms is quite impressive.

I've used the whale-oil analogy many times in the past, but I never thought to do this kind of analysis (partly because I would never have bothered to chase down the data).

This is simply delightful, Ugo.  Many, many thanks.

I have been officially baited :)

Consider sperm whale production if coal fired steam turbine ships had come into exsistance while whaling was still the primary source of oil. Just imagine a alternative history for a bit. Where

http://en.wikipedia.org/wiki/Turbinia

Just consider for one moment a steam powered harpoon at the front of this ship.

Next while your at it pour a stiff drink sit down and consider oil production and technology.

There is a reasonable explanation for these differences. First of all, neither whale oil nor whale bone were so crucial for life in 19th century as crude oil is today for us. There were alternative fuels for lamps: animal fat or vegetable oil, a little more expensive and considered as inferior products; but usable. Then, starting in the 1870s, crude oil started to be commonly available as lamp fuel. It probably had an effect in keeping down the price of whale oil.

Um, yes. To the extent there were large price spikes and valleys, I think there's a message here. However, the price of oil won't be going down as long as mechanized civilization lasts. There is simply no substitute for it as there was for whale oil. Crude oil will probably still be gaining in value when the human maps have been redrawn with radically different borders. Its intrinsic value as a store of "magic" is nearly unequalled. (Had whale oil allowed man to fly through the stratosphere and smite his enemies with fire from the sky, whales would have been pursued with undiminished vigor, price be damned).

For whale bone, instead, a replacement didn't really exist except for steel, which was probably much more expensive during the period that we are considering. But stiffeners for ladies' clothes were hardly something that people couldn't live without.

Of course "whale bone" is baleen, which is about the same material our fingernails are made of. It's similar to a resilient plastic. And of course, sperm whales didn't have any. And to correct another minor point by a commenter, spermaceti doesn't come from a sperm whale's brain but from a reservoir in its head which is probably used for regulating bouyancy; it's actually a wax which changes state and thus bouyancy at a temperature which can be regulated by a whale's voluntary control over blood through vascularization in the chamber, I think. A mile down, you'd really want something like that. I think that's what whalers called the "sperm". I can tell you that you really don't want to get it splashed all over you when you're doing an autopsy on a rotting sperm whale; it's enough to make you jump into the bloody water with the sharks, and it will sink into your skin and you'll smell like a whale corpse for weeks.

On the contrary, the decline of the catch was attributed to such factors as the whales' "shyness" and the declining "character of the men engaged". Starbuck seems to think that the crisis of the whaling industry of his times can be solved by means of governmental subsidies. Some things never change.

This is a nice "human nature" point, and my favorite part of this comparison. That, and the fact that the dude's name was Starbuck, which seems almost as big a coincidence as if his first name had been Moby.

Just the whales' luck that the replacements for whale oil would melt the poles, acidify the seas, mess up the currents and destroy their food supply. Which we seemingly are doing. This mess is our payback for being dopamine-pursuing monkeys, but wholly their tragedy. The sperm whale has the largest cerebral cortex - by far - on planet earth. Bowhead whales (a kind of 'right' whale) live to be 200-300 years old, it seems. We have no authority to assume their thinking is inferior to ours by any but ape criteria. The story of the biosphere's destruction this time is a human story, but the possible end of many kinds of self-aware megafauna is arguably a far greater loss than the surplus population of hairless apes. Their story of evolving intelligence and (in all cases so far tested) self-awareness had, for millions of years, been a successful one.

The moot point is, whether Leviathan can long endure so wide a chase, and so remorseless a havoc; whether he must not at last be exterminated from the waters, and the last whale, like the last man, smoke his last pipe, and then himself evaporate in the final puff. —Herman Melville, Moby Dick (1851)

Ugo, is there any pattern in these data sets that can tell us how long after the peak the exponential price rise stops?

If anyone else has a hankering for Moby Dick after reading this article there are several free editions compliments of Project Gutenburg (including an audio book version)

http://www.gutenberg.org/browse/authors/m#a9

I read it once years ago. Might be time to tackle it again.

Brilliant post Ugo, thanks.
If it wasn't for the advent of kerosene, whale skeletons in museums would be what we would have had left from this amazing creature.

….. and there is always the herring-collapse in the Northern Atlantic taking place in the 1960's. A scrutiny done in 1977 concluded that (in this year) the herring population was down to only 1% as compared to mid 1950’s. Technical advances and faulty scientific recommendations were blamed. The herring is now back some 50 years later ….. in sort of sizable schools ... hopefully lessons are learnt !

Image :Idled herring-fleet western Norway in early 60's

Dude, I want a Hummer that runs on whale oil! Whale oil - the original biodiesel!

I hope you will help us share Ugo's post--use the available "Share This" buttons or here's the direct reddit link:

http://reddit.com/info/6jihy/comments/

Thank you for a fine article.
The most interesting point for me is the extreme volatility the price exhibited when resource constrained - it has certainly altered my expectations for the degree of volatility to be expected by oil as it gets in shorted supply.
I see much more residual demand remaining after most oil is extracted, as oil will remain useful for many things.

I am confused about the peak in whale oil. You show it in 1845. According to the NYT almanac, the peak in the worldwide whale catch was 1965. Is this because the whales were being taken for reasons other than oil, i.e. meat after the 19th century?

In the mid 20th century whale oil was a key part of automatic transmission fluid. It would hold a consistent viscosity over a wide temperature range and it took quite a while to come up with a good replacement. Jojoba was looked at as a good substitute.

There were alternative fuels for lamps: animal fat or vegetable oil, a little more expensive and considered as inferior products; but usable.

we do have an alternative fuels- ELECTRICITY!

we can use it in our cars and to light our homes...

And finishing your thought, John15, what will be the energy sources for this new electricity substitute? Coal? Nuclear? Where are the new power plants? It takes petroleum resources to construct and supply them, so they will at some point, sooner than later, become expensive, perhaps prohibitively so. Then, there's that CO2 problem with coal.

Nice article on the whales. I wonder how they feel about humans. I can guess, though.

It is completely pointless to analyze the price history of whale oil, since crude oil came along to replace it. That would be like attempting to analyze the price of crude if something like "zero-point" energy were discovered and made into a merketable product. For example, imagine if there was a 10 kW free energy generator the size of a toaster, selling for about $1000. The price of oil would begin falling dramatically. It would not be long before every car was powered by one of these things. (Or a dozen, knowing americans!) The funny thing is, even if we had such amazing technology, we'd still need oil. If for nothing else than to build free energy generators. I doubt the price would fall below $10 a barrel.

But anyway, the point is that I dont see a free energy generator anywhere on anybody's roadmap. I dont see Bill Gates or Warren Buffet donating billions to fund the kind of development required. As long as this is true, you wont be able to compare crude oil price history to whale oil price history.

Good post, this gave me the motivation to rant on a favorite subject.

The Sigmoid Fraud
Unlike Sigmund Freud, I don't do psychology as a career but I do see something seriously disturbing about the fact that a majority of depletion analysts view the Logistic Function as something that contains some deep and significant meaning.

On the contrary, the Sigmoid curve --as the simplest manifestation of the Logistic-- remains a cheap empirical relationship that describes a value that increases and then saturates below some constrained limit. It indeed does follow from the solution of a non-linear differential equation, but this equation describes the temporal dynamics of a simplistic birth-death model used to describe interacting entities. One can choose populations of biological creatures or concentrations of chemical reagents to plug in to the equation. But you don't insert oil molecules into the equation and expect it to make any sense.

So in keeping with the posting topic let us look at how it might apply to whale oil harvesting in the 1800's. Although Ugo does not bring up the Logistic to describe the saturation, a few commenters do. Fair enough, whales do fall into a biological classification, and they do give birth and die. But whale oil harvesting never tracked a population rise in whales themselves. It actually tracked the reverse. So, instead of calling it a "birth-death" model we should refer to it as a "death-birth" model. The parameter "death" represents the culling of the whale population for oil and any residual "birth" comes about because the whales can reproduce themselves based on the size of their population. Then as an exercise for the reader, one can plug some values into the birth-death equations as described here: Derivation of Logistic Growth.

But then we get to the real twist. Since whales do reproduce, if we play our cards right, then the amount of whale oil that we can harvest has no limit! The URR of whale oil essentially becomes infinite since the cumulative never abates. And unless we harvest the whales to extinction, the Logistic Function will fail miserably in describing whale oil production. (In actuality, cumulative whale oil production likely saturated because crude oil replaced whale oil as a harvestable resource.) See passenger pigeons if you want to get closer to a saturated harvest driven to extinction.

This whole analysis when incorrectly applied to oil exploration and production can induce early psychosis. On the one hand, oil does not reproduce like a biological entity nor does it act like a chemical reagent. So the equations themselves make no sense. But since oil only gets consumed and obeys the rules of a finite resource (abiotic-oil-mental-midgets notwithstanding), it will eventually saturate. So the Sigmoid falls into our lap in spite of itself. The fraud survives in effect only because it looks like an S-curve !

To avoid this mental anguish, I prefer to use the Dispersive Discovery formulation for discoveries and the Oil Shock model for extraction/production dynamics. This approach makes intuitive sense, the math falls out naturally, and you don't have to continue to psychoanalyze insane ramblings of people that live in some freakish world where square pegs fit into round holes and empiricism has the dynamic range of a stupid heuristic. The rise and fall of the oil culture deserves a better understanding than the Logistic can ever offer.

OT: I love you guys/gals.

Great conversation. Utterly fascinating (like many other TOD threads, too). Thanks.

Other than that, I have nothing to add.

There is another supply/demand quantity that needs to be entered into the equation, and that is the excess supply of dollars looking for a place to be invested. The dollar has gone through a great devaluation in the same time frame that oil has gone up. Hedge funds are investing in all commodity markets, not just oil, at levels not seen before. Sovereign Wealth Funds are also trying to invest their declining value dollars. There are more dollars looking to be invested in commodities with limited production than the present system can handle. As a result, commodity prices go up.

It's not the relationship between supply and demand of the commodity itself that is changing the markets so radically but the relationship between surplus dollars and limited commodities. Without this factor, it's hard to explain such a steep rise in commodity prices when supply and demand are not really greatly out of line. As we used to say in farming, any fool can make money on a rising market. As long as there are dollars out there with no place else to go to achieve such a high return, the markets will continue to climb. Until the panic hits.

One can't predict in detail what will happen in our complex and unprecedented situation. Oddly, though, all the scenarios outlined here seem to stop short before arriving at widespread human mortality.

Death is coming for millions, even billions, but before people starve to death, they will first go to war. Here is the sequence I expect us all to see:

1) I pray my neighbor will die before I do. (I plan to dismantle his house for firewood, eat his food, enslave his children.)

2) I wait for a few months or years. Nothing dramatic happens to either me or my neighbor, except that we both become hungrier every day.

3) I decide that I must help my neighbor die, or risk dying myself before he does.

4) Widespread death by violence becomes increasingly common, bringing with it universal misery, declining population and eventually some kind of steady state living arrangements.

Sadly, I see no other realistic possibility! Humankind must exist at a drastically lower population if our species and our culture are to survive.

Unlimited war is more likely to break out before mass starvation kills any substantial fraction of us. Nuclear weapons, nerve gas, high-tech remote killing -- they will all be used.