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Crude Oil: how high can it go? (19th century whaling as a model for oil depletion and price volatility)
Posted by Ugo Bardi on May 15, 2008 - 9:59am in The Oil Drum: Europe
Topic: Alternative energy
Tags: gaussian, hubbert curve, oil, oil prices, peak oil, whale oil [list all tags]
19th century whaling is today one of the best examples we have of a complete cycle of exploitation of a natural resource.
The production curves of whale oil and whale bone in the United States in 19th century (from "History of the American whale fishery" by A. Starbuck, 1878). Both show a clear bell shaped Hubbert's curve. Click to enlarge.
A few years ago, I appeared in TV for the first time in my life. Oil had just passed 38 dollars per barrel and I was invited to speak in a national financial channel as the president of the newly formed Italian section of ASPO. When I said that I expected oil to rise well over 40 $/bl soon, everyone in the TV studio looked at me as if I had just said something very funny. All the other experts there hastened to contradict me and said that 38 $ per barrel was just a spike, speculation, and that prices would soon go back to "normal."
Seen in retrospect, it was an easy guess that oil prices had to rise. You only had to know a little about Hubbert's theory. As I am writing these notes, oil prices stand at around 120 dollars per barrel and may well keep rising. But for how long? The problem with Hubbert's model is that it is good for predicting production, but it tells you nothing about prices.
There are all sorts of economic models that attempt to predict prices, but their record is very poor. So, maybe the answer can be found in historical examples. If we can find a resource that has peaked and declined to zero or near zero production in the past, then its historical prices could give us some idea of what to expect today for oil.
There are many resources that have peaked and declined at the regional level; crude oil in the United States is a good example. But the price of US oil doesn't depend only on US production; it is affected by imports from other regions of the world. So that's not useful for understanding price trends at the global level. What we are looking for is a global resource that has peaked worldwide or, at least, in an economically isolated region.
After much search, the best example that I could find is not that of a mineral resource but of a biological one: whaling in 19th century. Whales are, of course, a renewable resource but if they are hunted much faster than they can reproduce, they behave as a non renewable resource; just like oil. We have good data about whaling compiled in books such as Alexander Starbuck's "History of the American whale fishery" (1878). In Starbuck's times there was no such thing as a "global market" for whale products. But the reach of the whaling ships was worldwide and the effects of whale depletion were felt in the same way by all markets in the world. So, we can take the prices reported by Starbuck as directly affected by the behavior of the production curve.
So, here are the results for the two products of whaling; whale oil and "whale bone". Whale oil was used as fuel for lamps, whale bone was a stiffener for ladies' clothes, as were fashionable in 19th century.
Whale oil production and prices (adjusted for inflation) according to Starbuck's data.
Whale bone production and whale oil prices (adjusted for inflation) according to Starbuck's data.
The results are clear: whaling did follow a Hubbert style "bell shaped curve", approximated in the graphs with a simple Gaussian. Whales did behave like a non renewable resource and some studies say that at the end of the 19th century hunting cycle there remained in the oceans only about 50 females of the main species being hunted: right whales.
Now, looking at the historical prices, we see an increase in the vicinity of the peak for both whale oil and whale bone. For whale oil we see a spike after the peak, for whale bone the trend is smoother. In both cases, the smoothed growth is nearly exponential. We can see this exponential trend in the smoothed data.
Smoothed whale bone and whale oil prices (adjusted for inflation).
It seems that what we are seeing now for crude oil parallels the historical data for whale oil and whale bone. There are also differences; for instance the prices of whale oil didn't rise so much as crude oil has been doing lately. On the average, for whale oil we see a doubling of the price, followed by a plateau. For whale bone, we see a much larger increase, more than a factor of 10 from the beginning to the end of the whaling cycle. This increase is comparable to what we are seeing today for crude oil.
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. 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.
In comparison, crude oil is such a basic commodity in our world that it is not surprising that prices have risen so steeply. Airlines, for instance, have no choice in between collapsing and buying oil at any price. For other activities, the conditions of the choice may not be so stark, but still we can't survive without oil. If the exponential rise of oil prices were to continue unabated for a few more years, we would be seeing some kind of demand destruction, indeed.
But the historical data for whaling tell us that an exponential rise of the prices is not the only feature of the post-peak market. The prominent feature is, rather, the presence of very strong price oscillations. We can attribute these oscillations to a general characteristic of systems dominated by feedback and time delays. Prices are supposed to mediate between offer and demand, but tend to overcorrect on one side or another. The result is an alternance of demand destruction (high prices) and offer destruction (low prices).
What we are seeing at present with crude oil is, most likely, one of these price spikes. Eventually, it will overdo its job of curbing demand and turn into a price collapse. We can imagine how, in the collapsing phase, everyone will start screaming that the "oil crisis" of the first decades of 21st century was just a hoax, just as it was said for the crisis of the 1970s. Then, a new upward spike will start.
Here, too, the history of whaling can teach us something in terms of the difficulty that people have in understanding depletion. In Starbuck's book, we never find mention that whales had become scarce. 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.
In the end, the history of whaling tells us that what is happening now to crude oil shouldn't have taken us by surprise. The future can never be exactly predicted but, at least, it can be understood from the lessons of the past. One of these lessons, however, seems to be that we never seem to be able to learn from the past.
__________________________________________
I reported the results of this study on whaling for the first time at the ASPO conference in Lisbon in 2005. Later on, I published a complete paper in "Energy Prices and Resource Depletion: Lessons from the Case of Whaling in the Nineteenth Century" by Ugo Bardi, Energy Sources part b. Volume 2, Issue 3 July 2007 , pages 297 - 304. You can find it on line here
If you like to play with Starbuck's data, here is the complete set .
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
Here's something I threw together a couple of days back for a Uni assignment...
Caveats:
1) I'm no Statistician, this wasn't for maths or stats etc, more comms related - and I don't fully understand R-squared either.
2) The green/blue/red break-years are just from eyeballing - the curve fits are whatever from Excel's suite that fitted best for each segment (but not surprising they're exponential)
A very clever friend suggested I check that the red curve isn't a simple offset of the blue curve - I did, it isn't, the exponential function is definitely steeper. Click for bigger.
Its interesting the good agreement with the different curves.
Its also interesting that the switch to the new curve coincides with the end of the '06 summer bullrun and the disconnect seen in US pump price rises noted elsewhere.
I wonder if someone somewhere had a meeting.
PS the red curve says $150 before year end, easy
The price behavior seems to defy economic sense. The price elasticity is getting LESS elastic as the price goes up rather than more elastic. It has also been more than 3 years since prices started to rise, so longer term elasticity should be kicking in. (and we have reports of record mass transit usage, so we know something is happening). But that is not slowing the price rise.
Worse, the world supposedly had a rise in oil production last fall/winter that broke the 2005 production numbers. Yet the price did not drop back to 2005 levels. No, that was in the middle of this rapid price increase.
Intuitively, what I feel is happening is that in 2002 - 2007 the poorer consumers were pushed out of the market. They had more elastic demand to oil price. Now that they are gone, wealthy consumers are the only ones left. USA, Europe, China. Those remaining are much less elastic.
I think we are going to see a sigmoid price response. Sigmoid Curve Shape
Where the top part of the curve is set by the maximum value for a barrel of oil. A rough estimate of the maximum value comes from GDP/Barrel of oil Equivalent energy consumption. Roughly $600.00 ($2006)
However, it takes about half the energy of a barrel of oil to use that oil (energy for extracting the oil, building the roads, building the cars, maintaining those cars) so at a price of $300 a customer would be trading back to the supplier the whole value they could expect to get from the oil.
I don't think that price can be sustained for long. It can only happen when subsidized by other energy sources. Or when the purchasing country starts selling off embodied energy to pay for the oil. (like selling banks and farmland etc).
What I feel this Post on Whale Oil is mostly saying, is that humanity has no models for what will happen as a major energy source depletes on a world wide scale. We have always had another (often better) choice. Now, at best, we have worse choices (electricity). And what will happen to the price will need to be determined by model rather than by analogy to past events.
The Sigmoid has no meaning other than as a cheap heuristic to subjectively describe an S-curve, see my rant way below. I know that you aren't applying it to describe something like a URR, yet I don't want to propagate the myth that it has some brilliant deeper meaning.
I mean that the prices will have an S curve with a sharp rise in the middle. The low part of the S is when there are more producers than consumers. They bid against each other holding the price low. Prices rise slowly with production costs.
Then peak oil happens.
Now you have more consumers than producers. They quickly bid up the price for this non-replaceable resource. Prices slew rapidly toward the top of the S. I think that is what we are seeing now and why price elasticity is decreasing - which is opposite of expectations.
Prices stop rising when most of the value of a barrel of oil is going to the producer. Prices stop rising because consumers have no extra margin to trade for more oil. The consumer economy has little surplus to grow. Demand destruction is causing contraction (holding the price lower).
I don't think we are at the top of the S yet. I think at $300.00 we will be there.
I agree and this happens for reasons completely different than what happens in a Birth-Death model which produces the textbook definition of a Sigmoid.
Hi JonFreise,
You say "...at a price of $300...I don't think that price can be sustained for long..." In several European countries we are already paying around USD9 per gallon and this I think represents more than USD300 given the pathetically low US taxes.
At USD9/gallon i do not see a great deal of demand destruction here and sales of gas guzzlers such as Porsche & Mercedes are holding up. In fact revenues at Porsche are increasing:-(
IMHO it will take a significant increase, $200/barrel? to noticeably decrease demand.
You have a point about the higher prices per gallon in Europe. But most of that price is tax. And taxes stay in the national economy. In the model I am putting forward, most of the value will be leaving the local economy. However, your point is still valid if the price of oil payed out circulates back in some manner.
or if you print fresh new money to buy that oil from a thin air...
The linear to exponential switch happens in 2002, a scant 2 years after the date Hubbert published for global peak production some 40 years ago.
I just posted an article doing what you suggest: oil price projections out to 2012.
Oil Prices in 2012
Would you believe $900/bbl by the beginning of 2012?
Now try extrapolating Nortel stock from IPO to 1999.
I think your a tad low in the sense your not adjusting for inflation. Inflation adjusted your probably looking at 1200 in 2012 dollars. Other than that about right.
Interestingly, if you shift the 2007 onwards curve upwards to remove the 2006-2007 downwards blip - then you do get a continuous exponential, but with a slight excursion recently. $25-30 offset. The resulting curve shape with dates feels about right, with prices rising $100 a year by 2012.
There is a hypothesis that can be made about this. On an underlying basis as 'possible supply' and 'demand' meet there is an exponential price rise expectation as users fight it out for supply. The market however is very human, certainly far from perfect, and can react to sentiment to introduce shocks into the price curve, offsetting the progress of the underlying price rises. Similar events can be seen around points of recession - the curve trend shape on either side is the same, the period of the shock is chaotic.
Thus the expectation is defined by the general curve, with periods of chaotic drift before the curve re-establishes itself. When does it end? Well I'd suggest that once people realise the available supply is on the way down the rules of the game change and we get a discontinuity in the price curve. I wish I could say I think that's going to be a plateauing, but Instead I think it may well be an upwards jump as active hoarding begins.
Here's another attempt to model ocean biomass and price:
Census of Marine Life
Looks like the typical exponential increase in price, followed by extinction and demand destruction.
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.
Luis, you are going into some interesting details. First, about sperm and right whales, the amount of whale oil produced by right and sperm whales was approximately equivalent over the whole 19th century whaling cycle. But if we examine the populations, right whales were almost completely exterminated whereas sperm whales show just a modest population drop (there is a reference cited in my paper showing these data). That shows clearly how "easy" resources are exploited first and also - i think most important - that the physical amount of a resource is not the only factor in the Hubbert cycle. A modest drop in the number of sperm whales, added to the disappearance of the right whale, was enough to make sperm whale hunting, alone, economically impossible. Hence the Hubbert curve!
And about Moby Dick... yes, thar she blows!! (coming from "the Simpsons?"). I think I remember that Melville does say that whalers would never run out of whales. But I don't think it was because he had an intuition of the Hubbert mechanism. It is more a typical attitude of whalers; you can read similar statements in Starbuck's book. It is funny to note that nowhere in the novel Melville mentions what whale oil was used for (at least, I couldn't find it). For him it was so obvious that it wasn't worth mentioning.
Ah... Luis, I went to look at the data and I must correct myself. The area of the bell curve for sperm whales is smaller than that of the right whales; about a factor of two. So, right whales were more important throughout the cycle. Also, the Hubbert peak for sperm whales came earlier than for right whales. Indeed, sperm whales were more numerous but more difficult to catch.
Here are the data
Ugo, from Encarta you can read:
Wikipedia on the Right Whale:
One of the earlier chapters of Moby Dick is dedicated to whale oil's place in society. Melville explicitly address the issue of lamp oil increasing productivity in other business activities by extending work hours. Something that in his view made all other commercial activities indebted to Whaling. If I recall correctly he also explains the applications of other products like spermaceti and whale bone.
I think the graph you show is gathering all the other hunted species in the same bucket. Beyond the Right Whale (which was easier to catch because was slower) the Humpback, the Grey and the Bowhead where also hunt, so I believe that the second curve encloses the oil from these four species together. This kid's website (grin) claims that the sperm whale was the most hunted of them all.
On the NMFS website you can read:
Obviously Melville didn't knew the Hubbert model (especially so when at the time the Verhulst equation was only 10 years old – grin). But he left very clear in the book that the industry was in serious difficulties and that further growth wasn't possible, all lead by factors external to the whaling business – the whale availability itself.
I bet that the total number of whales harvested since 1900 eclipses whatever is under the peak for the 1800's. Cripes, I think the Japanese hunt Mink whales under the auspices of "research" only to turn it around and use the harvested whale meat as a dog food supplement. http://www.jref.com/forum/archive/index.php/t-21988.html
So much for the vaunted Verhulst equation in describing the URR of a replenishable resource.
(see my rant way below)
"research", I don't think so. Greenpease announced yesterday:
"...
We just released the results of a four-month undercover investigation, and at this moment it's growing into the biggest scandal to ever hit the whaling industry in Japan. It's on the front page of one of Japan's most influential newspapers today. All six Japanese television stations attended our press conference this morning. We're demanding that the government revoke the permits of the whalers as a result of the scandal.
We presented evidence today in Tokyo of decades-old, widespread embezzlement of whale meat occuring under the noses of the public officials who run the whaling programme.
The best cuts of whale meat, used to make whale bacon, are smuggled into crew cabins, preserved in salt, and then shipped home in boxes marked "cardboard" or "salted stuff" to be sold on the black market. We intercepted one such box -- worth up to US$3,000 -- and presented it to the Tokyo Prosecutor's office as evidence this morning.
We have evidence that more than a ton of such whale meat was snuck from the whaling ship this year. One of our informants claims to have heard a crew member boast of building a house on the proceeds from his illegal take.
..."
If you want to support Greenpeace protest to the Japanese government look at this link
http://www.greenpeace.org/international/news/whale-meat-scandal-150408/j...
Ouch!
It looks like the peak i n sperm whale precipitated increased hunt for the right whale. You can see the production of right whales really take of near the sperm whale peak.
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.
...perhaps that would have been termed "Enhanced Recovery Techniques"?
Nick.
That picture is from 1894 the book on whaling mentioned in the article was compiled in 1874.
Only twenty years later. We have been extracting oil for about 100 years the turbina was the technical level
at the beginning.
The technology used to hunt whales on the open sea barely changed over about 100 years limited to to the constraints of wind and wood.
Think about it.
Here's what happened when industrial whaling came to the Pacific in the mid-20th century:
Sequential megafaunal collapse in the North Pacific Ocean: An ongoing legacy of industrial whaling?
This graph illustrates a trophic cascade: once great whales were hunted nearly to extinction, orcas turned to other marine mammals. Eventually, the sea urchin population exploded, and they ate the North Pacific kelp forests.
So not only was the whale population drastically reduced, whole ecosystems were destroyed.
Thanks Barrett for this summary of the industrial fishing situation. There are also books on this subject; for instance "The end of the line" by Charles Clover and "The empty Ocean" by Richard Ellis. And a large corpus of scientific literature.
Fisheries are a nearly perfect example of what economist call "free access" resources, known for a long time. The first study was by Gordon, in 1953. Later on, Garrett Hardin would popularize the concept with the name "the tragedy of the commons". "Commons" are free access resources; fisheries are the best known example.
Fisheries have been studied for a long time and there are many (too many) cases of overexploitation. 19th century whaling is the first global case in history, but there are many others. In another comment I cited the case of the Caspian sturgeon; it is all the same. In most cases, the production curves show the classic "bell shaped", or "Hubbert" curve. I think that the Hubbert model is a generalized description of the exploitation of a free access resource. It doesn't matter if it is renewable or not, it is just destroyed at the fastest possible rate. And things don't seem to be changing
We humans as a species know everything we really need to know about maximum sustainable yield. Yet, time and time again we fail to implement it, prefering to just deplete a renewable resource to near-extinction.
And we think that we are such hot stuff. There may be intelligent life in the universe, but I'm not at all sure that we're "it".
Ugo, thank you for the perspective. For what it's worth, regulation and enforcement efforts are increasing, for example the Western and Central Pacific Fisheries Commission. If what I hear around Fisherman's Terminal in Seattle is true, the Bering Sea fishery is tightly regulated and reasonably sustainable.
Regulation and enforcement efforts must be greatly increased globally, if we're to have living oceans into the future.
Yes, regulation is the second phase of the exploitation of a free access resource. Hardin's "commons" model is valid only for the first phase; the overexploitation one. The studies show that humans slowly arrive to understand how to exploit renewable resources in a sustainable way. The problem is that this phase comes late; after that the ecosystem has been thoroughly wrecked. It is often too late to return to the initial conditions; what is left to regulate is a degraded, low productivity system. Better than nothing, though, and regulation of fisheries is surely to be increased as much as possible
Besides the orcas and the sea urchins, another cause of dieback of the ocean ecosystems was the sudden lack of whale poo.
The numbers are amazing. Three million Blue Whales had a biomass of around 200 million tonnes, and deposited over one Billion tonnes of "fertiliser" per annum into the oceans. This suddenly stopped as almost the entire population of Blue Whales was wiped out in the two decades following World War One. (When the Turbina's descendents were perfected as "submarine chasers"...)
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).
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.
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)
As you read about what we have done in the past our future looks hopeless but in reality its simply that this path of arrogance is now closed. For the first time in centuries absolute greed no longer produces the desired results. We are being force to submit to the limits of this small planet.
"the limits of this small planet" are hardly set in stone by the amount of extractable oil. The limits tend to be a cosmic derivative of the energy radiating from the sun..
Cheers, Dom
"For the first time in centuries absolute greed no longer produces the desired results."
Definitely. How ironic that in this boom of greedy oil use, the oil producing countries and large oil companies are scraping by without profit. It will only get worse for them as the resource becomes more scarce.
I think your missing the point. For about 100 years greed today has lead to even more success down the road.
Certainly it has cost many lives but overall as you point out even today by taking the approach of effectively taking as much as possible as fast as possible the US has become the envy of the world.
Mega profits today do not ensure future results.
Not sure if you see this or not but the golden goose is out of eggs and its time for dinner.
Correct me if I'm wrong, but isn't that Hubbert's point about the discrepency between our money/banking system with fiat currency and finite resources? The system works as long as we haven't reached the limits to geometric growth - for earning interest on money follows the same geometric growth. For once there is no geometric return on money, then the system malfunctions..
No your correct he spent a lot of time talking about this. Thats what makes ensuring that post peak society transforms itself with as little pain as possible almost impossible. The underlying problem is we have to effectively redo our financial system to one that promotes store of value not growth. The best investment would be leaving money in a bank account. Effectively a highly deflationary economy.
Given this underlying problem its tough to see how we can transform. In my opinion the fact we are and the end of a credit bubble and at the start of a massive credit deflation actually makes things harder since the only way I can see to convert is to increase interest rates to force savings to grow as debt deflation continues. Once monetary deflation is well entrenched then interest rates are dropped to zero and the increased purchasing power of less and less money substitutes for interest.
The problem or I guess the goal of the current approach is that by allowing deflationary collapse to occur and keeping real interest rates low leads to price inflation and no savings so the end game with the current approach is most people end up broke with zero money once monetary not debt deflation begins. By monetary inflation I mean cash is king. When this finally happens a lot of assets will be available for pennies on the dollar. But no one will have any money. Or at least none of the common people.
Thus following the long credit deflation/ recession with rising commodities event we end with a classic 1929 style monetary deflation and depression.
At this point sure we probably will adopt a renewable economy but thats the only one going. The problem is all the money ends up in the hands of a few. Of course this might not be considered a problem by those in control of our current money supply. They are not fools and they don't have to be peak oil aware to realize the expansion economy is already dead.
That's not the first time I have encountered the notion that we will soon find all the money in the hands of a few, or even taken to its logical extreme just one person owning all the wealth and every one else in debt to him.
Now the interesting fact hiding behind such a scenario is that the value of money exists only in peoples' minds. And when all but a few people are oppressed by it then it's difficult to see the institution of money (and associated "wealth") being given recognition for much longer by the majority. Hence there would be one or more revolutions ending with some new system under which the wealth would not be in the hands of a few! That's the financial/physical wealth at least; the intellectual and labor-productivity wealth will always be distributed very unequally/unfairly.
A good way to avoid having your 'turn in the barrel' then? ;)
I used to work on sulfur amine boron chemistry.
Whale corpse probably have no comparison. Take DMSO animate it and add some borate amino complexing to make uber solvent that smells like cat piss X 10000 and get a few drops on you.
Rotting whale blubber boiled with sulfur dioxide urea and borax is a pretty good approximation.
Anyway assuming rotting whale blubber is high in ammonia and sulfur we are probably kindred spirits :)
You may not realize it but your talking to the king of stink.
Raise you one rotting whale baked in sulfur :)
Ugo, is there any pattern in these data sets that can tell us how long after the peak the exponential price rise stops?
Kerosene and coal oil replaced whale oil so I would not read to much into the flattening of price.
Although whale oil is a perfect example of logistic behavior of a finite resources with constant technology.
Substitution makes the price behavior after about 1860 or so a bad model for oil post peak.
When does exponential price stops? I wish I knew; there are different possible explanations for the data. As mentioned, price rises for whale oil may have been stopped by the competition of rock oil. Stiffeners for ladies' clothes may simply have gone out of fashion. Or, there may be some internal mechanism that cause prices to plateau after a while. I am playing with models to see if there is something in this possibility. Maybe.
Or, the fashion "market" responded to the increasing cost/decreasing availability of one of it's raw materials. I don't have any of my history of fashion books at hand in my office, but it would be interesting to see how changes in women's clothing tracks against the data shown in these oil and bone charts.
Corsets were worn (by the middle-class and upwards) for quite some time post-peak whale bone - right up into the the WWI period. There was some switching to the use of spring steel (as well as cane and even waxed cardboard) in the late 1880's which is probably attributable to the lack of availability of whale bone (and perhaps the ramping up of spring steel availability).
It wasn't until the 1920's that fashionable women really began to give up the corset (and many older women continued or switched to nearly equally confining girdles.
Not just middle class and upwards. Domestic servant women were generally expected to wear corsets as well.
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.
Moby Dick is a very good read. Melville includes a huge amount of technical detail on whaling, much more than a modern novelist could get away with given today's audiences. How much coincidence is it that the cited scholarly article was written by someone named Starbuck and that Captain Ahab's first mate on the Pequod was also named Starbuck?
Can anybody recommend a novel that covers the petroleum industry the same way? I'm thinking roughnecks and roustabouts working the Texas oil fields or maybe something about an offshore platform.
"Can anybody recommend a novel that covers the petroleum industry the same way?"
not in a single book, here are some candidates:
"texas rich" about h.l. hunt (sorry cant find my copy to tell you the author)
"the greatest gamblers" (cant find copy either)
"this fascinating oil business" ball,douglas and turner, dan
The Substitution is Already happening. In the link I gave yesterday the IEA states that 2/3 of the estimated 1.5 million (net, I guess) gallons coming online this year will be biofuels.
First, thanks Greenish and Memmel for pointing out that the lack of a scaleable substitute for rock oil makes the whale oil comparison fall down post-peak. And kd, I believe you mean 1.5 million barrels, 2/3 of which would be 1 mbd, not much more than 1% of current use, and it's already consuming, what, more than 20% of the US corn crop. Biofuels ain't gonna come close to scaling, and that's even before accounting for their very lousy EROEI.
You're right; Barrels (it's just a wee bit early for me.)
Hey, a million barrels, here; a million barrels, there. Pretty soon you're talking a significant.
Don't get all super-invested in Corn. There's Brazilian Cane, Malaysian Palm oil, Texas Algae, and, who knows about cellulosic.
The fact is, a lot of things become viable when oil is at $125.00/barrel.