I have been playing Amnesia: The Dark Descent recently and I got inspiration for Lantern in Minecraft! So I worked on it and came up with this. The way it works is it uses xp levels as oil and you get the levels by holding water potions which are consumed. Then it sets the block at your feet to torches. Then as you move the torches around you get replaced with air so it doesn't affect other blocks. You need one of the 1.8 snapshots for this to work. Hold a torch and it wil start working if you have levels.