Everything You Need to Know About Petroleum

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Podcast Transcript

Thousands of years ago, humans discovered a black-yellowish liquid that come out from the ground and could burn when it was set on fire. 

Today, the fluid that seeped from the rocks is responsible for much of our modern world.

But how does that fluid become usable fuel, and how exactly do you get it out of the rocks? 

Learn more about petroleum, aka crude oil, and how it gets from the ground to your vehicle, on this episode of Everything Everywhere Daily.

Even though the use and harnessing of petroleum is relatively modern, knowledge of petroleum is actually quite ancient. 

The word petroleum is derived from the Latin words petra, which means rock, and oleum, which means oil. So, petroleum literally means, rock oil. The word was coined in 1546 by the German geologist Georg Bauer. 

Today, petroleum is synonymous with the term “crude oil”. They both refer to the liquid substance pumped directly from the ground. 

The substance we know as petroleum has been known for at least 6,000 years, and probably well before that, wherever humans found it near the surface. 

There were ancient Greek texts which told of petroleum being used in the construction of the Hanging Gardens of Babylon. Ancient Persian texts spoke of the use of petroleum for lighting lamps by the upper levels of society. 

Pools of petroleum were reported on the surface in various places in the Middle East. 

Petroleum was documented being used as a fuel as early as the first century BC in China, and the first oil well was built using bamboo in the year 347. 

Native people in what is today Western Pennsylvania were using petroleum in their ceremonies and as a healing lotion in the early 15th century. 

In the middle ages, Islamic scientists conducted experiments on this fluid, and they were the first people to discover the secrets of petroleum distillation. Marco Polo noted the production of petroleum in China such that it could fill hundreds of ships. 

So for a very long time, people knew about and used petroleum, if they happened to live in a place where it was easily accessible near the surface. The problem was, there weren’t many places where that happened. 

Before I go much further into how petroleum is used, I should probably talk about what exactly it is. 

The textbook definition of petroleum is that it is a naturally occurring organic fluid that comes from the Earth. It is a blackish color with yellow tints which become evidence if you pour it or smear it on something. 

The overwhelming consensus view is that petroleum comes from the remnants of organic matter which were buried millions of years ago. The pressure and temperatures beneath the surface of the Earth gradually transformed it into petroleum. 

I say overwhelming consensus because there are a few renegade geologists who believe in what is called the abiogenic theory of petroleum. This holds that petroleum actually is created by inorganic processes and doesn’t come from former organic matter on the surface. They think that it comes from organic molecules which were inside the Earth when it was formed.

Petroleum isn’t really a single substance like iron. Petroleum is more like a soup that contains hundreds of different hydrocarbons, organic compounds, and even a tiny bit of metal. Hence, the chemical profile of petroleum taken from one place is going to be different from petroleum extracted from another place. 

So, petroleum is actually more of a category like wheat or rice, where there are actually different strains that differ from each other slightly. 

Petroleum is categorized by two criteria: sulfur content and its  American Petroleum Institute or API gravity. 

Petroleum with little to no sulfur is called “sweet” and petroleum with a lot of sulfur, anywhere from 2.5% to 4% might be called “sour”.

The API gravity of petroleum is a measure of its density. Petroleum with a low density is called “light” and if it has a high density it is considered “heavy”. 

If you have ever heard of light sweet crude oil, this would be referring to petroleum with a low sulfur content and low density. I’ll explain in a bit why this matters and why someone might want to buy one type of oil over another. 

There are categorizations of oil based on where it is from. For example, West Texas Intermediate is a grade of crude oil based on the type that is found in West Texas. It is a light, sweet petroleum. Any petroleum which fits into the category can be called West Texas Intermediate, even if it doesn’t come from Texas. 

Other categories include Brent Blend, from the North Sea, Western Canadian Select, and Dubai Crude. 

Even though we often speak generically about the “price of oil”, there are actually different markets for each petroleum grade, although they are usually never that far from each other.

Crude oil is bought and sold in units known as barrels. One barrel is equal to 42 US gallons, or almost exactly 159 liters. 

If the use of barrels as a unit of measurement seems rather antiquated, that’s because it is. 

It actually dates back to the very first industrial petroleum wells which were developed in Pennsylvania in the 19th century. 

They needed a way to transport this liquid to other places. The industry which had already mastered the art of transporting liquids was the alcohol and spirits industry. 

In the United States, the whiskey industry had standardized on a 40-gallon wooden barrel. The oil industry tacked on two extra gallons to compensate for spillage and loss in transit, and the 42-gallon barrel was adopted as a standard in 1866. 

If you see prices for oil listed, the units will sometimes be abbreviated as “bbl”, which stands for “blue barrels”. There is a persistent urban legend that the term comes from the barrels used by John D. Rockefeller’s Standard Oil Company. 

In his desire to make his business ever more efficient, he grew his own lumber and made his own barrels which were painted blue. However, subsequent research has found that the abbreviation “bbl” was used for barrels well before the creation of the petroleum business. 

As the original Latin name indicates, petroleum comes from the ground. The extraction of it comes from oil wells. 

While there is a global market for crude oil which tends to make the price uniform, the costs associated with petroleum extraction can vary dramatically. 

Many of the places which traditionally been associated with crude oil production, like in the Middle East, don’t just sit on large pools of crude oil. They sit on very easily accessible pools of crude oil. 

Just to give you an idea, the United States produces about the same amount of crude oil as Saudi Arabia. However, to do that, the US needs about a million separate oil wells, the vast majority of which only produce between 1 to 10 barrels per day. 

Saudi Arabia, however, has only a fraction of the number of wells because each well is incredibly productive. There are Saudi wells that can produce over 10,000 barrels per day. 

There are many petroleum reserves in the world that can be tapped, but it is only economical to do so if the price of oil is very high. That is why many of the world’s latest crude oil producers have an incentive to keep prices high, but not too high. Once prices get beyond a certain point, it becomes cost-effective for competitors to start extracting petroleum from sources such as shale oil and oil sands.

There are billions of dollars spent every year by oil companies searching for new oil reserves. Some of the things that they search for are sedimentary rock and especially sedimentary rock with what is known as anticlines. 

An anticline is just a bend in the rock formation which is in the shape of a capital ‘A’. The opposite of an anticline would be a syncline, which looks like the letter ‘V’.

Because oil and gas are fluids, they tend to get trapped under these anticlines. If you can identify where an anticline is underground, you can identify a good place to drill. 

Getting crude oil from where it is produced to where it is consumed is usually done in one of two ways. Either an oil pipeline or an oil tanker. 

There are pipelines that can move crude oil over 4,000 kilometers, and there are supertankers that can ship over 2,000,000 barrels of crude oil. Supertankers are the largest ships that have ever been built and the largest supertankers can supply a country like the United Kingdom enough petroleum for a single day’s consumption. 

Crude oil, in its raw form, is of little use to anyone. The real value in it is from what other chemicals and hydrocarbon fuels can be extracted from it. 

The process by which fuels come from crude oil is known as fractional distillation. 

As I mentioned before, petroleum is actually a mixture of many different types of hydrocarbons. 

Very light hydrocarbons like methane, propane, and butane are gasses at room temperature. These are often captured during the extraction process and are handled separately from crude oil.

The other hydrocarbons in petroleum have different boiling points. To separate them, crude oil is slowly heated. As it is heated, various hydrocarbons will turn to gas at different temperatures. 

The vapor is then cooled to capture whatever the particular hydrocarbon is.

One of the lightest and first compounds that are captured in the fractional distillation process is gasoline. I mentioned before the different grades of crude oil. The lighter a crude oil is, the more gasoline can be extracted from it.

This is why there can be differences in prices of crude oil types because refiners need to know what the end products are going to be based on the makeup of the raw crude. 

As the petroleum is heated, other substances are distilled away. These include naphtha or white gas, kerosene, jet fuel, diesel fuel, heating oil, and fuel oil. 

At the very end, you are left with coke or other carbon compounds which can be used in the manufacturing of plastics. 

Approximately 46% of a typical barrel of crude oil will be converted into gasoline. 26% is diesel and other fuel oils. 9% is jet fuel, 3% is asphalt, 1% are lubricants such as motor oil, and the remaining 15% are the bottom of the barrel products which have industrial non-fuel usages. 

Gasoline, because it is one of the lightest liquids that can be extracted, can actually evaporate. As such, it usually is refined and then sold within a few weeks or months after it leaves the refinery. 

The largest producer of crude oil in the world as of the time I am recording this is the United States, followed by Russia, Saudi Arabia, and Canada. As of 2021, there were 88 million barrels of oil produced globally every single day. 

In addition to the use of barrels as a unit, one of the other features of the petroleum industry is that prices are always listed globally and purchased in US dollars. This system, known as the Petrodollar system, was established in 1974 and will be the subject of a future episode as it is fascinating, extremely important, and most people have no idea how it works. 

For better or worse, for over 100 years petroleum has become the world’s most important commodity.  It has been the focus of diplomacy, intrigue, and wars. Despite efforts to the contrary, its importance as a commodity will probably continue into the foreseeable future.