There's a story, of unknown veracity, that in 1863 President Lincoln asked what whiskey General Ulysses S. Grant drank. Nobody knew the brand, so Lincoln purportedly replied, "Because, if I can only find out, I will send a barrel of this wonderful whiskey to every general in the army." The timing was particularly poor — that same year, whiskey prices were soaring.
The chart below, courtesy of the David Rumsey Collection, appeared in Henry Gannett's 1883 Statistical Atlas of the United States, using the American Almanac and Treasury of Facts as its source. You can see prices jumping from roughly 19 cents a gallon to $1.92 a gallon in just 3 years (and soaring even higher after that):
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The best explanation for that spike, in The Book of Bourbon and Other Fine American Whiskeys by Gary Regan and Mardee Haidin Regan, is that taxes and supply shortfalls worked in concert to make booze pricey.
There was general economic uncertainty during the Civil War, which began in 1861. And in 1862, Congress set significant whiskey taxes (all the whiskey bought in the sample was purchased in New York). Whiskey taxes and other excise taxes helped fund a long and expensive war.
The taxes started at 20 cents a gallon and soared to 70 cents by 1864 and $1.50 by 1865, the year the Civil War ended. In 1866, they were a whopping $2 (the chart shows a $2 low price for that year, but it was likely higher for legal whiskey buyers because of the tax). In 1868, Congress reduced that tax to 50 cents a gallon, which is probably the biggest reason the price drops in the chart.
It wasn't only taxes. In the Confederate states, Prohibition was enacted in 1862 to preserve corn for food, and that dried up some of the supply, though backwoods "moonshine" distilling continued. (The Book of Bourbon authors claim that black market whiskey prices soared during the Civil War, too.)
Wondering why prices never returned to pre–Civil War era lows? This 1889 article reports how distillers artificially depressed production by forming the so-called Whiskey Trust, which kept booze expensive even after the war was over. There were other wild gyrations in demand and supply as well, including eager and available European customers, new distilleries, consolidation, and other trends.
