25 (or so) years ago, the Toy Train Mailing List had an ongoing discussion on Lionel smoke pellets and smoke fluids. One of the contributors, Dr. Chip Miller, a chemist at a research facility, analyzed the pellets and determined that they were Terphenyl. At a Friday morning York TTML breakfast, he gave the attendees packets of the white powder with a caveat of "don't let LEOs catch you with it". I believe Dr. Miller's identification of the Lionel chemical led to the re-manufacture of pellets. This article is a description of Lionel's smoke pellet development and Dr. Miller's identification of the chemical.
MTH delivered it's (IIRC) first diecast articulated engine in 1996 - the Railking Challenger - with a motorized smoke generator that replaced the Seuth units used previously. The new MTH unit generated billows of smoke. I first ran this engine at a holiday show and quickly ran out of smoke fluid. Once the fluid bottle distributed with the engine ran out, one of the other show operators, a musician who used smoke generators, brought in a gallon jug of his smoke fluid which worked great. Of course the MTH instructions demanded only MTH smoke fluid (unavailable at the time) so I was interested in what the musician/theater guys used to generate smoke. The chemical is usually propylene glycol. In TTML discussions, Dr. Miller said that a propylene glycol mist was used to prevent infections in labs (here is an NIH paper on the subject). Dept 56 smoke fluid is scented propylene glycol. So, assured that propylene glycol mist is not a health risk I started using readily available Dept 56 fluid as a substitute.
Highly refined lamp oil was recommended by some in the years before MTH began shipping their own smoke fluid. A bottle of lamp oil can be mineral oil or kerosene. A smokestack fire from vaporized kerosene is not something to want under an xmas tree layout and this forum had warnings against using lamp oil.
Mineral oils are the basis commercially available smoke fluids. Mineral oil flash points vary (they are higher than kerosene) as well as the persistent of the oil particle cloud. I hope that a "food grade" mineral oil is used. They are scented to disguise the fact that the cloud is vaporized oil particles. Your sensitivity may vary.
At shows, my clubs use smoke fluids from several manufacturers. We host up to 1,000 guests a day and the ventilation of the venues is sometimes inadequate. We like to have all the sight and sound features of our trains active. Some guests have to get away from the layout when several steamers are operating so when we see this happening, we turn the smoke down, or off, to let the air clear.
At home I usually turn smoke off so I don't have oil particles settle on everything. (I have too many dust collectors as is).