In the 1970s it was petroleum. Back in 1905 it was timber. In other eras it was food, rubber, whale oil, charcoal, labor, and tin, to name just a few. Throughout human history, from one age to the next, there have been critical shortages of resources. And in each instance, there have been experts who predicted that we were soon to run out of the resource and that society was doomed.
Forecasts of doom and gloom have existed for as long as civilization has existed. But all these forecasts have been wrong. No civilization has collapsed because of the depletion of a resource. Again and again, so-called resource crises have been overcome. And it hasn't been because people learned to live with less. Nor has it been because governments stepped in to regulate production and consumption. Instead, freely functioning markets have eliminated the shortages. When markets have been allowed to operate, shortages have induced price increases. People have reacted to these increases by finding substitutes for the scarce resource, by adopting new technologies, and by resource conservation.
Reports in the popular press notwithstanding, the problems we face today are no different from those that societies experienced in the past. As long as markets are permitted to function freely, we can expect resource scarcities to be resolved with the same patterns of adaptation. Our faith in the ability of the market to eliminate crises is not based on metaphysics or even on the power of modern economic theory. Instead, it is based on the simple fact that the market has repeatedly worked to eliminate resource shortages in the past. A look at just one historical example-America's whale-oil crisis in the nineteenth century-shows how the market works to solve critical resource shortages.
During the past decade, we have heard much about alternative energy sources and synfuels. However, few people remember that petroleum is itself an "alternative energy source." Petroleum-or, as it was called, "rock oil"-was the alternative energy source of the 19th century.
Prior to the Civil War, America lubricated its machinery and fueled its lamps with oil from whales. Sperm oil, obtained from the sperm whale, was the best illuminant available at the time. But oil from other types of whales, because it was considerably cheaper than sperm oil, was widely used also. At the time, these oils were practically "essential" to an industrializing economy.
Nonetheless, during and after the Civil War, the whaling industry experienced a rapid decline. What led to such a dramatic decline? Why did such an important industry become so insignificant? Many writers have argued that the discovery of petroleum led to the demise of the whaling industry. For example, in The Whalers, A. B. C. Whipple asserted that:
It is a safe assumption that in 1859 very few, if any, whale-men had heard the name Edwin L. Drake. And there was no reason why they should have, for Drake was an obscure entrepreneur. But over the next decades every whale-man would come to know, and curse, Drake's name. For on August 27 of 1859, his Seneca Oil Company succeeded in extracting petroleum from the earth by drilling 69 feet down into the soil near Titusville, Pennsylvania. In so doing he put an end to Yankee whaling industry just as surely as if he had drilled a hole in the hold of every whale-ship.
Unquestionably, petroleum did replace the previously necessary sperm and whale oil as the primary illuminant and lubricant during the decade after the Civil War. But many who have written about the rise of the petroleum industry tell a different story from that told by the chroniclers of the demise of whaling. For example, in the centennial issue of World Oil, we find the following:
Oil had been known since the beginning of history. The pitch used to caulk Noah's Ark undoubtedly was petroleum. Many other simple uses are recorded in the early pages of history and down through the centuries. Early American settlers found Indians skimming oil from seeps and using it for both internal and external medicine. A few enterprising American business pioneers were selling "Rock Oil" as medicine by the middle of the 19th Century. Their sources of supply were seepages or salt brine wells in which they were ^unfortunate" enough to find oil.
However, no one gave any serious study to the commercial possibilities of oil until the simultaneous beginnings of the Age of Light and the Machine Age created the world's first and most serious oil shortage.
Keep in mind that the preceding quotation was published in 1959, fourteen years before our own serious oil shortage. However, the important assertion made in this article was that the rise of the petroleum industry was itself the result of a shortage of whale oil-America's first oil crisis.
Which was it? Did the rise of the petroleum industry sink the whaling industry? Or, was the advent of the oil industry the result of a shortage of whale oil? Was there a whale-oil crisis? Let's look at some historical evidence.
The first whaling in North America was done by Indians on the east and west coasts, long before Europeans arrived. The search for whales probably began with the killing of stranded whales, for which the Indians kept watch.
After Europeans settled New England, they also kept watch for and killed stranded whales. Not long after the settlement of New England, American whalers began to go to sea and hunt whales, probably because relative to the expanding population, fewer and fewer whales were becoming stranded in coastal bays.
New Englanders became familiar with the new (to them) and superior sperm whale when one of their species became stranded close to shore. As people became familiar with the superiority of sperm oil as an illuminant and as certain other types of whale were becoming scarce, whalers increasingly searched for sperm whales. A new industry was born.