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What Can We Learn From Peak Whale Oil?

Haley Zaremba

The energy industry is based on what was once thought of as an inexhaustible natural resource, but over-exploitation and a growing reliance on oil has made extraction more and more costly and difficult as previously abundant areas have run dry. What’s more, in the areas where this natural resource has been depleted, what’s left behind is environmental devastation. We have reached peak oil--peak whale oil, that is. The year is 1846. 

In the 18th and 19th centuries, sperm whale oil, known as spermaceti--which is extracted from the heads of sperm whales--became an invaluable source of lamp oil, as its smokeless flame made it an ideal fuel source, which in turn made it a commodity with high value and high demand. The whaling industry responded in kind, by massively ramping up their production and quickly driving sperm whales bear to extinction.

As reported by Gizmodo in their article “1846: The Year We Hit Peak Sperm Whale Oil,” the craze spread rapidly on both sides of the Atlantic. “Sperm whales were hunted mercilessly in the mid 1700s and early 1800s. A single, large sperm whale could hold as much [as] three tons of sperm oil, making them an incredibly valuable commodity — and in fact, they became the first of any animal or mineral oil to achieve commercial viability. 

“And like any new innovation, consumption habits quickly followed suit. Americans and Europeans started using sperm whale oil to fuel lighthouses, street lamps, and public buildings. Wealthier folks stopped using home-made tallow candles, preferring the more hi-tech alternative. The spermaceti candle became so prevalent that it created a new light standard: the lumen."

Sperm whaling spread rapidly off the east coast of the United States in the 1760s and 1770s, “moving from the east coast of the American colonies to the Gulf Stream, the Grand Banks, West Africa, the Azores, and the South Atlantic,” ramping up most critically between the years of 1770 and 1775 as whaling became a huge industry in  Massachusetts, New York, Connecticut, and Rhode Island, which together “produced 45,000 barrels of sperm oil in each of those years.” The success of the U.S. whaling industry soon caught the attention of European interests as well, with the French particularly keen to cash in on the endeavor. 

Whales quickly became critically overfished in the Atlantic, pushing whaling enterprises further and further into faraway, colder waters and to hunt smaller and smaller whales. “The intense whale hunting drove the number of sperm whales down appreciably. It's estimated that nearly 236,000 whales were killed in the 19th century alone,” reports Gizmodo. Negative externalities of the rapidly expanding whale oil industry were widespread and almost immediate in a textbook case of the tragedy of the commons, with seas turning into grizzly bloodbaths described by Gizmodo as a “showcase of terrors,'' an epidemic of “whale widows,” and sharp increases in the price of whale oil as demand continued to grow and whale stocks were fished nearly into extinction and “whalers, after plundering the Atlantic, Pacific, and Indian Oceans, were having to chase smaller whales in colder and more extreme waters, while having to utilize bigger ships over longer periods of time.” In 1846 the industry reached a breaking point, culminating in what we now know was the moment that the world reached peak whale oil. 

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Even after demand shrank, however, whales almost certainly would have been fished into complete extinction as long as there was any profit margin--albeit a shrinking one--to be made. But whales were saved at the last moment by an unexpected and unrelated innovation. Gizmodo writes: “the industry peaked at this time for another reason — and it had nothing to do with what was happening on the oceans. Rather, it was the invention of a new fuel source, one that, quite literally, saved the whales.” This fuel source was kerosene, the petroleum product that started it all, initiating the petroleum industry in the United States that was later revolutionized by John D. Rockefeller’s Standard Oil.

So what can peak whale oil teach us about the modern day oil industry? The question is extremely relevant, considering the fact that peak oil has been in the news all week in the wake of Saudi Aramco’s record-breaking initial public offering. As part of the IPO, the world’s largest oil company released a prospectus including projections that oil demand will continue to grow until 2035, but that peak oil may occur even sooner, in the 2020s. On top of this, at least according to Bloomberg’s Liam Denning in his opinion piece “Brazil's Oil Flop Is a Warning for Majors and Aramco,” Brazil’s recently lackluster sale of oil deposits--their biggest ever--was another knell for impending death of the oil industry, remarking that the sale’s failure indicated "expectations on the part of many investors that oil has entered its twilight years."

Peak oil is an inevitability, but the timing exactly when it occurs will have major implications for the global economy as well as the globe itself. As the scientist community and the Intergovernmental Panel on Climate Change have consistently asserted, the majority of the world’s proven oil reserves will have to remain in the ground if the global community has any chance of avoiding catastrophic climate change and keeping the world from warming more than 1.5 degrees Celsius over pre-industrial average temperatures as stipulated by the Paris climate agreement. Denning argues that this fact itself could be one of the factors making peak oil approach even faster than previously projected. "Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital."

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It’s unequivocally true that the issue of peak oil is arising not from an issue of scarcity, but because of a projected peak in oil demand. As Bloomberg reports, “The peak oil that’s talked about today is quite different from the concept that emerged in the 1950s, when M. King Hubbert, a Royal Dutch Shell Plc geologist, predicted that U.S. oil production would crest in the 1970s and the world would physically run out of oil.” It’s not just Saudi Aramco that is predicting that peak oil is just around the corner--although their admission of this fact is particularly salient. The International Energy Agency has also predicted that oil consumption will plateau in approximately 2030 “amid the use of more efficient car engines and electric vehicles,” as paraphrased by Bloomberg. “Renewable energy is taking off, electric companies are switching to cleaner-burning natural gas, and the cost of solar power has fallen 50% in a decade. That’s upending the business model of utilities, which were designed to deliver fossil-fuel energy from large power plants to homes and businesses.”

So what is the lesson from peak whale oil? It’s that innovation and new technologies are the key. We have to accept that both oil and oil demand are finite, and the peak is just around the corner. The question is what industry will fill that vacuum. Solar and wind are already major contenders and the sectors are seeing massive growth, along with a boom in the energy storage industry, which will potentially allow these variable energy production methods to be stable and viable replacements for fossil fuels. Then there are those that suggest nuclear fission is the answer. There is also geothermal, the world’s cleanest energy, which is already being developed with unprecedented vigor in countries like Japan and the United States. And then there are those new clean energy alternatives that are still in development but closer to reality than ever, like the clean energy holy grail of nuclear fusion. On, some, or all of these could be the key to the future of energy. The only certainty is that the future of energy will not be in oil.

By Haley Zaremba for Oilprice.com

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