Via Ralph Dillon of Global Financial Data,
In today’s markets, when we discuss Wood/Lumber prices as a commodity, it is often related to home building and used by some as a economic indicator as a strength or weakness in the home building segment.
What most don’t realize however, is that Wood has traded as a commodity for over 5 centuries as an Energy source. It wasn’t until Coal and Oil became common place for the commodity to lose it appeal as a major traded commodity.
Wood has been and still is today, a primary source of energy. From cooking and heating to producing steam, we have seen its role change throughout our history. As the use for wood grew, more Europeans discovered uses for the commodity especially after they started using it in furnaces in the steel making process. As the uses for wood continued, Europe began to see rapid deforestation especially from the 15th -18th century. What became clear in Europe, is that the trend of the deforestation simple could not continue. By the 1550’s, the English Parliament began passing laws that restricted the use of Wood as a fuel source. In addition, when England went to war with France in 1620, wood and lumber began to show signs of a severe shortage. In order to build its fleet of ships to continue its war efforts, England had to import all of its wood from Scandinavia and from the colonies in the America. Spain who was also active in ship building and war, felled huge sections of its forest to build the famous Spanish Armada. Once the fleet was lost, Spain didn’t have enough to rebuild it and sought out new supplies of wood from all over the world.
By the middle of the 18th century, Europe was in an energy crisis and sought out new energy sources. As the process for extracting and refining coal became more efficient, more European countries began relying on Coal more and hence its demand increased. The exact same could be said of Oil.
For the very same reasons that coal replaced wood, Oil became a primary source of energy and the commodity of Wood lost its luster as a primary energy source. In 1870, Wood prices stopped being recorded as Oil and Coal replaced it. It wasn’t until the last few decades that they started tracking Timber prices to reflect wood as a home building product and not as a primary energy source.
Below we take a look at 513 years of Energy sources... Starting with Wood from 1500 to present day Coal and Oil prices.
(click image for larger legible version)