Whale Oil to Petroleum: DeMythologizing a Free Market Parable

The story is sometimes told as a hopeful parable about the prospect for switching to renewables.

We’re told that a rapid transition to cheaper, more available petroleum products quickly killed the Whaling Industry in the 1800s – a natural progression of the free market, in effect, saved the whales.
Well, maybe not.

Climate State:

One hundred and fifty-five years ago, Edwin Drake stuck a pipe into a cleared patch of Pennsylvania timberland and started pumping the country’s first crude petrol. He changed the world, no question. But he didn’t save the whales.

What’s the connection? Every so often a writer or economist, usually right-leaning and supportive of an unfettered free-market, credits Drake’s discovery and the rise of kerosene as reason for the collapse of whale oil demand and the subsequent salvation of cetaceans.

The argument goes something like this: The United States didn’t need government research and subsidies to transition from whale oil to kerosene in the 1850s, and, similarly, we don’t need government intervention on energy sources in the free market today. The market saved the whales, and now it will save the Earth.

It’s a ridiculous twisting of history, but it keeps resurfacing; USA Today columnist and talk radio host Michael Medved offered the  latest rendering last month.

“The story should reassure present-day pessimists of the near miraculous power of technological advancement and pursuit of profit to save the environment,” Medved wrote.

This is bunk. The problem with the miracle whale oil story is it’s irresponsible and historically fake.

It’s irresponsible because kerosene did not replace whale oil. Whale oil production peaked in 1845 at 17 million gallons selling for $1.50 or more per gallon. It was a boutique market even then; by 1859, when Drake struck oil, whales were scarce, the whaling fleet was in trouble and whale oil sales were at 7 million gallons a year and dropping. Whale oil was on the way out long before kerosene was on the way in [larger graphic].

Civil war tax

Meanwhile, new products were coming onto the market. One of these, “camphene,” is almost unknown today but was by far the most popular lamp fuel in the 1840s and ’50s. Made of turpentine and alcohol, camphene and similar fuels reached about 100 million gallons per year by 1862.

That year, the oil industry got the first of many helping hands from Uncle Sam. Congress slapped a $2 per gallon tax on alcohol to help fund the Civil War, and that was that: Kerosene, taxed only at 10 cents a gallon, swept camphene off the market and into history books.

The idea that petroleum was a direct product of the free market is false.

In fact, the oil industry arrived on the gravy train of subsidy and policy privilege, and it has managed to hang on ever since, while at the same time claiming to oppose those awful subsidies.

Just in 2011, in terms of real dollars, direct subsidies for fossil fuels were $500 billion worldwide – six times higher than the direct subsidies for renewable energy, according to the UK-based Overseas Development Institute.

Medved argues that “the nation’s giant steps toward energy independence owe more to new methods of taking fossil fuels from the earth than to tightened regulations, or the heavily subsidized – and still struggling – wind and solar industries.”

Oh really? How subsidized?

The Daily Climate last year compared renewable energy subsidies to other subsidies in terms of “Solyndras” — a unit representing the $535 million loss, often invoked by Medved and his buddy Rush Limbaugh, that taxpayers absorbed after a failed solar company defaulted on its government-backed loans. According to the analysis:

• Annual federal oil and gas subsidies? Equal to 8 Solyndras.

• Carbon capture coal technology? 5.6 Solyndras.

• Leaking gasoline storage tanks: The equivalent of 58 Solyndras.

• Yucca Mountain nuclear waste repository? A whopping 180 Solyndras.

The list goes on, but the point is obvious. The government is deeply involved in direct energy subsidies, and it has been since the beginning.

Petroleum didn’t undercut the whale oil industry, and an unfettered free market didn’t create the petroleum industry. To use imaginary history to degrade discussions about energy policy is about as historically irresponsible as it gets.

Bill Kovarik is a professor of communication, an environmental historian, and a frequent contributor to The Daily Climate.