Prices and Quantity for Whale Oil and Whale Bone
by Mike Kimel
Prices and Quantity for Whale Oil and Whale Bone
Cross posted at the Presimetrics blog.
The following graph shows the price and quantity of Sperm whale oil (which is actually more of a wax).
The positive correlation is a bit of a problem, and the fact that Quantity seems to lead Price by about ten years is a bit more of a problem.
Now, that could be just an interesting artifact, except for this graph, which shows the price and quantity of whale oil (and this time I do mean oil).
Notice that the correlation is negative (sigh of relief) but once again, you get some information about prices from quantities produced decades earlier.
Here’s whale bone. Its worse.
So what’s going on?
This post comes from something I’m playing with at work (I’m trying to understand how a few specific commodities might play out over a very long period of time) and is posted with the permission of my boss. (Thanks Lauren!) I don’t usually like to play with data that goes that far back as it isn’t always reliable but I figured this was fine for broad strokes purposes.
Price and quantity data from A History of the American Whale Fishery by Walter Sheldon Tower, Tables IV and V. Data was entered by hand so hopefully I didn’t screw up too much too badly. CPI estimates from the Minnesota Fed.
If you want my spreadsheet let me know – I’m at mike period my last name (one m only) at gmail.com.
So what’s going on?
Supply is not the only determinent of price. There is also demand. Kerosene lamps, a superior product, overtook whale oil about the time of the precipitous price decline in your graph. Whale bone not affected by this, and is driven by different demand factors (decline in ivory?)
Thanks for the info. It looks like we never actually saw peak whale oil, but rather it got high enough in price that subsititutes were sought out and developed. First coal oil and then rock oil (petroleum).Given that this happened in a totally free market, it does suggest that if rock oil does a similar trend a subsitute will arrive from the market. In fact to at least some extent we have seen one shale gas.
If the peak theory were correct the production should have been a nice bell curve, but it rather looks like a baseline shift, which does imply a demand driver, not a direct supply driver.
Does the big drop in production have a known external cause? Shortage of whalers during war?
The fact that bone does not drop in quantity when oil does also suggests a technical factor in bone pricing. Perhaps bone was a by-product that had no particular demand until the late 1800s.
You can also have some odd feedback. A high price could result in overfishing, dropping future available supplies. The high price could be caused by lack of substitutes or simply by particularly cold whether.
I think you have too many uncontrolled/unmeasured variables to create a valid model.
Does the big drop in production have a known external cause? Shortage of whalers during war?
The fact that bone does not drop in quantity when oil does also suggests a technical factor in bone pricing. Perhaps bone was a by-product that had no particular demand until the late 1800s.
You can also have some odd feedback. A high price could result in overfishing, dropping future available supplies. The high price could be caused by lack of substitutes or simply by particularly cold weather.
I think you have too many uncontrolled/unmeasured variables to create a valid model.