Invisible Fuel: Manufactured and Natural Gas in America, 1800-2000

Published by EH.NET (July 2001)

Christopher J. Castaneda, Invisible Fuel: Manufactured and Natural Gas in

America, 1800-2000. New York: Twayne Publishers, 1999. ISBN:

0-8057-9830-7. xx + 250pp.

Reviewed for EH.NET by Andrew Jenkins, Institute of Education, University of

London, UK

Invisible Fuel appears in a series which aims to provide concise overviews of

the evolution of a variety of industries and major firms in the United States.

There is certainly a gap in the market for an up-to-date survey of the history

of the US gas industry and Dr Castaneda, the author of several monographs on

aspects of the history of the gas business, is well-placed to fill the gap. He

has succeeded in producing a balanced account, wide-ranging in its coverage,

which draws extensively on both secondary and primary sources, while always

remaining clearly structured and readable.

The material is organised chronologically. After a brief introductory section

outlining the European origins of gas manufacture, the second part of the book

covers the nineteenth century development of the gas industry in America in

about 60 pages. The first gas company in America was established in Baltimore

in 1816 and by 1850 some 50 cities had manufacturing plant for producing gas

from coal. Gas was mainly used for lighting, and because of the high price its

use was confined to the wealthiest of citizens, and to the business

community. For the latter part of the nineteenth century, Castaneda documents

the main developments including the origins and growth of the natural gas

industry, the remarkable increase in the use of manufactured water gas and the

beginnings of competition from electricity, when gas was ousted from the

provision of lighting and had to turn increasingly to the heating and cooking

markets.

The chapters on the first forty years of the twentieth century show that

merger waves and the involvement of companies such as Standard Oil in the gas

business soon created some large and powerful corporations. The trend towards

increased industrial concentration continued into the 1930s, with the

development of combined gas and electric companies, and of holding companies

controlling many subsidiary firms. Some companies owned long-distance

pipelines crossing several state boundaries, making it impossible for them to

be regulated at the state level. Anti-competitive practices led to calls for

new legislation at the Federal level to control the utility industries. The

1935 Public Utility Holding Company Act abolished the large pyramid-structured

holding companies and also required the separation of natural gas and

electricity operations. The 1938 Natural Gas Act enabled the Federal Power

Commission to approve or set the prices to be charged by natural gas

companies.

Part 4 of the book covers the era of federal regulation from the late 1930s

through to the 1980s. For more than twenty years after World War II the U.S.

natural gas industry enjoyed unrivalled growth and prosperity. The regulatory

framework delivered price stability for consumers while strict limits on entry

into the industry enabled the established gas supply companies to earn

satisfactory profits. Improvements in pipeline technology meant that gas from

the large natural gas fields in the south-west of the country could be piped

into large north-eastern cities such as Boston, New York and Philadelphia

which had been the last bastions of manufactured gas in America.

But the seeds of future problems were sown in this era of prosperity. The

regulatory framework established in the 1930s did not allow for controls on

the prices of natural gas production, only transmission. Since there were

large numbers of producers, many of them small-scale, there was not a

compelling economic logic for the regulation of production. On the other hand,

it was difficult for regulators to set fair prices for consumers without some

control of the wellhead price, especially for integrated companies. The

extension of regulation into gas production, after the Phillips decision of

1954 in the US Supreme Court led eventually to serious shortages of natural

gas. Regulated wellhead prices were too low to encourage sufficient

exploration and new production. By the late 1960s, gas production was running

well ahead of the discovery of new reserves, and by the 1970s producers were

unable to meet their contract obligations in full.

The book concludes with a discussion of how successfully the deregulation of

the American gas industry from the 1970s to the present day has been at

overcoming these problems, and also provides some apposite comparisons between

the large utility combines of the 1930s and those which have emerged in recent

years as one of the more worrying aspects of deregulation.

Overall, the book is at its best on matters of business history, supplying in

concise narrative form information on particular entrepreneurs, technological

and organisational innovations, and changes in the competitive environment

faced by gas businesses. There is a lack of emphasis on regulatory issues,

especially for the period before Federal regulation. The origins of regulation

in the utility and transport industries in this period have been widely

debated by a range of commentators, from left-wing historians such as Gabriel

Kolko through to Chicago economists, who have analysed the role of interest

groups, consumers and of the companies themselves in establishing regulatory

bodies. It would have been fascinating to have had a blow-by-blow account of

the main developments in the case of the gas industry, but this would have

required considerably more space than the one or two very brief paragraphs

provided here.

Some comparisons with other countries would have been valuable. Other

developed economies have also witnessed the decline of a long-established

manufactured gas sector, as well as competition with electricity, and battles

in the political arena with oil and coal producers. On the other hand, some

features of the American gas industry, such as the lack of municipal or

government ownership appear more unusual. Comparisons with other countries

could have sharpened the analytical focus.

The book is generally well-provided with graphs and statistical tables but a

few more would have been useful. The author tells us that electric lighting

supplanted gas lighting rapidly, but no figures are provided. Similarly some

data on the extent of use of manufactured and natural gas in the nineteenth

century and the first half of the twentieth century would have helped to

clarify trends in these two sectors of the industry.

Such omissions as there are stem mainly from the concise format of the book:

surveying 200 years of the history of such a major industry in about 200 pages

of text is no easy task. Castaneda has accomplished it very well and Invisible

Fuel is an excellent starting-point for all students and researchers

interested in the history of the American gas industry.

Dr. Andrew Jenkins is a research officer at the Institute of Education. He

completed his doctorate at Bristol University in 1999, writing about the

nationalized British gas supply industry between 1945 and 1980. His most

recent publication is an article in the Journal of Industrial History

summarizing some of this research.