Sentinel Rock, Yosemite, 1872

The Whale Oil Myth

This site is featured in an August 2008 discussion with Paul Solmon (PBS News Hour business desk) and economist Lester Lave of Carnegie Mellon. Sincere thanks to both gentlemen for taking this historical work seriously and for their kindness in answering my questions.

By Bill Kovarik

Q: How many conservative economists does it take to change a light bulb?
A: None. The darkness will cause the light bulb to change by itself.

History is loaded with inaccuracies and myths, often used to lead is in one direction when, in fact, a more accurate account might provide a different lesson.

One recurrent and troublesome myth is that Pennsylvania oil arrived in the nick of time, around 1860, to replace a rapidly dwindling supply of whale oil. According to this myth, the "invisible hand" led the market to the Pennsylvania oil fields as if by magic.

What's troubling about the "whale oil myth" is that it is so frequently trotted out when it comes to modern energy policy.

President Ronald Reagan's economic advisor, Walter Wriston, often used the historical example of whale oil to argue that we didn't need a federal energy policy. All we needed was deregulation and the market would move in the right direction. Acting on this advice, Reagan crippled the energy and environmental regulatory bureaucracy in Washington during the 1980s.

In April of 2008, distinguished Carnegie Mellon economist Lester Lave told the PBS News Hour:

"In the 19th century, we were using whale oil for lighting. It was the best way to get light at night. THe problem was that there are only so many whales, and we had more people around. And so basically there just wasnt enough whale oil. So what happened was that in Western Pennsylvania, they discovered oil."

Of course, televised history almost has to be shallow. But it should be said that the historical facts Lave presents here are quite incorrect, and so is the lesson that no government intervention was necessary at the time.

The historical lesson for today, the implication that the free market should be the mainstay of policy, is certainly debatable, and no one in the US argues for nationalized energy companies or an unregulated energy market. The arguements fall in between, but the whale oil myth supports the conservative side in a way that needs to be challenged.

The fact is that kerosene did not simply replace whale oil.

In 1860, the government determined which technology was best. The oil industry was the favorite, and in effect, it was born with the competition swept neatly away and the silver spoon of subsidy (or tax advantage) lodged firmly in its teeth.

A variety of lamp oils

It makes sense that a variety of lamp fuels would be on the market in the 1800s.

Every sizeable town had a store devoted to a variety of lamps and lamp fuels and a "manufactory" for fuel.

By 1850 a consumer had a choice of:

The amount of camphene on the market was far above 90 million and probably close to 200 million gallons per year. That's about the same level as kerosene in 1870. Whale oil peaked at 18 million gallons in 1845, according to Starbuck's whaling history of 1878.

By all accounts, camphene was by far the leading lamp fuel.

In 1862, a tax of $2.00 a gallon was imposed on beverage alcohol and camphene was forced off the market. Since the Pennsylvania oil fields were in the process of opening, the whales really had nothing to do with the emergence of the kerosene industry.

Thus, kerosene came into an already well established liquid fuel system with full scale production, distribution and end-use technology already well in place. In other words, kerosene replaced an array of lamp fuels of various qualities and prices; it did not suddenly emerge to light up a world quickly going dark as the supply of whales ran out.

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Comment (By Dr. Lave):

There was a piece in the NY Times Sunday on whale oil (Peter Appelbome, "Once they thought whale oil was indispensable too)."

He (Appelborne) says that whaling was the 5th largest US industry in the 1850s - 735 ships out of 900 in the world. He says that whale oil was considered far superior to campher, lard, and other substitutes. He claims that whaling was in severe decline by 1861 - even though the first oil well (in Titusville) was 1859 - there could not have been much kerosene coming to market yet. He traces the decline to depletion of the easily accessible whale population - 8,000 whales killed in 1853 alone.

A economic view is that the cost of whale oil rose as the whale population was depleted. Ships had to go further and stay out longer to get their quota. The price rose, only the rich were willing to pay for this luxury good, and so the number of ships declined. The implication is that the whaling industry killed itself by depleting the whales. Kerosene filled the market until Edison came long in 1894 with the Pearl Street Station.

This seems to be a tempest in a tea pot. 8,000 whales caught with perhaps 20 barrels of oil each is 160,000 barrels of oil or 6 million gallons. With more than 1 billion people in the world, that is 1/170 of a gallon per person. Even if you consider just the USA and Europe, that would be 1/20 of a gallon each. That is not much light. Clearly, only the rich lighted their homes with whale oil.

I don't understand how a government tax on alcohol had anything to do with this. Burning alcohol for light is not wonderful - they have to turn out the lights for you to see the flambe. I don't understand the subsidy argument.

The Civil war certainly distracted the US whaling industry, but that just left more whales for the Europeans. The US could have gone back to whaling after the war, if kerosene had not taken over the market and the cost of a gallon of whale oil not become too high.

So, free market? Subsidization? I interpret the story to indicate that depletion of the whale population was the primary culprit. I don't see any evidence of subsidization. Applebome cites Eric Jay Dolan, "Leviathan: The history of whaling in America."

To elaborate: We switched from wood to coal because Europe ran out of trees - and it took some time to learn how to make iron from coal (you have to make it into coke first, eliminating the sulfur and other impurities and just leasing carbon). We have learned to use less tin (tin cans) because of high prices. In general, scarcity or just high prices prompt technological change. We are farming salmon, shrimp, catfish, beef, chickens, etc. because there aren't enough wild animals to satisfy demand. So high prices are one source of changes in materials and energy use. A second source is technology. We didn't run out of kerosene or city gas - electric lights were superior. We didn't run out of horses - motor vehicles were superior. We didn't run out of hydropower to run factories, electricity and internal combustion engineers were superior. Thus, developing superior products and processes are
another motive for innovation.

Response (Dr. Kovarik):

As arcane as it may seem, the whale oil myth is a good illustration of the ongoing debate over energy policy.

It matters because the implication that conservative economists draw from the "whale oil myth" is that the invisible hand of the marketplace is appropriately the main (if not only) driving force behind change in energy use. Liberals see a stronger role for government. In fact, the last time energy was this high on the public agenda, liberals like Sen Henry Scoop Jackson railed against the deregulation of petroleum industry as bowing to Walter Wriston's "whale oil myth." I think Jackson would be happier with where things are now and the general recognition (even by conservatives) that national security (at least) indicates a stronger role for government.

Its hard to imagine why Dr. Lave would say: "I don't understand the subsidy argument."

The argument is simple. In 1862, the dominant fuel (camphene) is taxed at over $2.00 a gallon, while the emerging new fuel (kerosene from Pennsylvania) is taxed at 10 cents a gallon. Not a subsidy? Perhaps tax advantage is a more precise term than subsidy. Even so, the point is that the policy, more than the market, is what changed the way Americans used energy in the 1860s.

I agree, this is not an earth-shaking question, but it is at least a notch up from "tempest in a teapot." Drawing the wrong lesson from inaccurate history can have impacts.

Also, it's not entirely correct to say: "Burning alcohol for light is not wonderful - they have to turn out the lights for you to see the flame." That's true for pure alcohol, but camphene was a blend of turpentine, alcohol and camphor oil. It tested brighter than kerosene, according to Congressional testimony from the Edison Testing laboratory in 1906.

 

Additional notes

Henry Ford, Charles Kettering and the Fuel of the Future, by Bill Kovarik has a lot more about camphene and whale oil, from sources such as the History of Light, pamphlet by the Welsbach Gas Co., Philadelphia Penn, 1909; on file in the Smithsonian collection of Advertising, Museum of American History, Washington, D.C.; and The Free Alcohol Law, Senate Finance Committee Hearings on HR 24816, Feb. 1907, Doc. No. 362.

Walter Wriston, The Whale Oil, Chicken, and Energy Syndrome at The Economic Club of Detroit 25 February 1974.

Lester Lave, Harry B. and James H. Higgins Professor of Economics and Finance, Carnegie Mellon University

Public Broadcasting Service News Hour story: "Greening Pittsburgh Paul Solman explores how an old steel city is implementing green energy."

Alexander Starbuck, History of the American whale fishery from its earliest inception to the year 1876 Washington, Government Printing Office, 1878.