The petroleum industry employs geologists and geophysicists who work in the field, in labs and with computers to look for underground formations that may produce deposits; landmen and scouts who determine where to drill for possible deposits; petroleum engineers, who decided how the drill is done; and the drillers and roughnecks who operate the equipment;

The oil industry is divided into upstream and downstream sectors. Upstream refers to the process of extracting from the ground and refining it. Down stream refers to the transportation of finished products and the selling of gasoline and other products to consumers---the commercial side of the business, such as gas stations or the delivery of oil for heat.

Oil infrastructure includes wells, pipelines, pumping stations, refineries and ports. The oil industry needs relatively little labor. Once the system is set up it more or less runs itself with the opening of some valves here and there.

Websites and Resources: American Petroleum Institute ; Investopedia Oil Handbook ; Petrostratgies Learning Institute ; U.S. Energy Information Administration ; New York Times article New York Times ; Wikipedia article Wikipedia ; Oil. com ; Petroleum Online ; Natural

Book: The Prize by Daniel Yergin.

Petroleum Production, Pipelines and Transportation

A barrel is equal to 42 gallons (160 liters) or 306 pounds and 7.4 barrels equals 1 ton. One barrel produces the same amount of energy as 500 pounds of coal or 5,700 cubic feet of natural gas. The barrel was agreed on by oil companies in the United States in 1866 for tax purposes. It is roughly the size of a whiskey barrel which was used to collect oil from gushers. Oil barrels are sill use on a few places like India but for the part hasn’t been used in more than century. Kiloliters is measurement favored in Japan and Russia prefers metric tons.

Petroleum account for a third of all international cargo. “Lifting costs” refers to the expense of raising a barrel of low-sulfur crude from rock formations. Iraqi fields have the world’s lowest “lifting costs,” Many of Iraq’s oil deposits are so shallow that the lifting cost are less than a dollar, compared to $2.50 in Saudi Arabia, and between three and four dollars in the Gulf of Mexico and the North Sea.

Most petroleum is moved over long distances by tanker ships or pipelines. Over shorter distances it moved by tanker truck or railroads. The largest supertankers cost round $100 million and can carry 4 million barrels.

Petroleum and Gas Pipelines

Deposit of oil and gas are only as good as transportation and delivery system that can carry them out. This is often done with pipelines, which are expensive undertakings, often costing considerably more than finding oil and pumping it out of the ground.

The Baku-Tbilisi-Ceyhan (BTC) pipeline is a 1,120-mile (1,760-kilometer) pipeline from Baku in Azerbaijan through Georgia via Supsa to the Turkish Mediterranean port of Ceyhan.Dubbed as the world’s largest energy scheme, the pipeline has a capacity of up to 1 million barrels a day and cost $4 billion to build. Financed largely by the BP-led consortium that is currently developing oil in the Caspian Sea, it is 91 to 117 centimeters in diameter, took 10,000 people to build and has an operation life of 40 years. The oil travels at 7.2 kilometers per hour and passes through the land of 35,000 people, each of who had to give their permission for the pipeline to be built. The pipeline avoids Russia and Armenia. A total of 445 kilometers is in Azerbaijan, 245 kilometers is in Georgia and 1070 kilometers is in Turkey.

The oil is moved through the pipeline by eight pumping stations---two each in Azerbaijan and Georgia and four in Turkey. The speed of flow is monitored by four metering stations, one each in Azerbaijan and Georgia and two in Turkey. The whole pipeline is dived in 88 section, each 20 kilometers long, separated by block valves so the sections can be isolated and cleaned. Environmentalist worry about leakage or the environmental impact of sabotage or a terrorist attack on the pipeline. The BTC pipeline formally opened in May 2005. Construction was originally supposed to start soon after the plan for the pipeline was approved in 1997, however, construction was delayed because of the political situation in Caucasus region. The pipeline reached full operational capacity in 2009.

Pipelines are cleaned with a devise called a “smart pig” that resembles a giant bullet with brushes. It looks for corrosion and other problems inside the pipeline. Ultrasound devices are used to check the pipeline’s thickness. The process is also and proceeds centimeter by centimeters often taking over a year to check an entire pipeline.

The Alaskan pipeline from Prudhoe Bay was shutdown in 2006 because a bacteria ate away at the pipeline walls. The bacteria takes root in places where seawater is used to extract oil from wells.

Petroleum Refining

Before petroleum can be used, it is sent to a refinery where it is physically, thermally and chemically separated into fractions and then converted into finished products. Petroleum is refined to separate out the desired substances from the undesirable ones. The refining process depends on what kind of petroleum product is desired: gasoline, jet fuel, asphalt, or ingredients for petrochemicals.[Source: Investopedia, The Industry Handbook: The Oil Services Industry]

The first step of refining is usually distillation. The oil is heated to about 750̊F so it rises up a tube. Trays are set up at different levels that separate out the different materials. The more volatile substance keep vaporizing and rise to the highest levels. Pipes run from the trays and collect the different substances. Substances trapped in the lower trays are used to make asphalt. Those collected near the top are used to make gasoline and other fuels. [Ibid]

To get rid of impurities solvents are added and removed with the impurities in them. The refrigeration process is used to separate out paraffin. "Cracking," the breaking large molecules into smaller ones with high temperatures and pressure, is used to make gasoline. Depending what is made certain chemicals may be added or catalysts used to cause reactions that produce desired substances. [Ibid]

Refineries produce gasoline, diesel, kerosene, and propane from crude oil. A large refinery can produce 7 million gallons of gasoline a day. Heavy fuel oil is a byproduct of the refining process. Sometimes 40 percent of a refinery’s production is heavy. heating oil. The refineries generally don’t want it and often sell it at a pittance just to get it off their hands. [Ibid]

Large amounts of money have been spent to reduce the sulfur content of petroleum products to meet new environmental standards. Conversion refineries remove sulfur from heavy, sour crudes. They have catalytic converters and hydro-cracking units that can separate the lighter crudes from thick sulfurous sludge. Catalytic converters and hydro-cracking units are very expensive adding as much as $500 million in cost to a conventional refinery. [Ibid]

Refineries take a long time to build. Building one takes a fair amount of planning and investment. It has traditionally been a low-margin, capital-intensive business. Investors have traditionally steered clear of them and many have been closed. There is currently a shortage of refining capacity in the United States and Europe and many refineries lack facilities to remove the sulfur from heavy, sour crudes. U.S. refineries have a capacity of about 16 million barrels a day. The shortage of refineries has raised profit margins. [Ibid]

Gas that is used as cooking gas come out of the ground with crude. To get the gas a lot of crude has to be pumped.

Petroleum Products

About 90 percent of these products are fuels such as gasoline, aviation fuels, distillate and residual oil, liquefied petroleum gas (LPG), coke (not the refreshment) and kerosene. Refineries also produce non-fuel products, including naphtha for petrochemical feedstock, bitumen for roads, petrochemicals, asphalt, road oil, lubricants, solvents and wax. Petrochemicals (ethylene, propylene, benzene and others) are shipped to chemical plants, where they are used to manufacture chemicals and plastics.

Around 60 kilograms of oil is necessary to refine one metric ton of fuels. The main oil refinery products are: 1) fuel oil; 2) diesel fuel; 3) gasoline; 4) kerosene; and 5) other products. Crude oil uses: 1) gasoline (44 percent); 2) fuel oil, including diesel and home heating oil (20 percent); 3) other, including plastics and other petrochemicals (18 percent); 4) petroleum gas, propane and butane (10 percent); and 5) jet fuel (8 percent).

In the United States about two third of the oil consumed is used to make fuel for cars, trucks and planes. Typically about 48 percent of the cost of a gallon of gasoline is the crude oil. Refining accounts for 15 percent of the cost; distribution and marketing, 10 percent; and state and federal taxes, 27 percent.

Light oil is use to make gassy products like gasoline, LPG and naptha. Middle distillates are used to make diesel and jet fuel. The heaviest components make heavy fuels, bitumen and bunker fuels used in ships and power plants in Asia. .

Heating oil has traditionally been mainstay for industrial-scale heating and electricity generation as wells as a source of heating homes. It is a very dirty product and in recent years has been shunned as environmental standards have risen. In many cases it has been replaced by natural gas.


Petrochemicals are organic hydrocarbon compounds made of long strings of hydrogen and carbon atoms. Most are obtained from petroleum or natural gas. They include things like propylene, formaldehyde, butylene, acetylene, acrylics, glycerin, styrene, phenols and the millions of chemicals that can be made from these things.

Ethylene is the raw material used in making plastics. It is refined from oil. Petroleum-based polyvinyl chloride is used for construction and ethyl glycol is used to make bottles.

Petrochemicals are used to make all kinds of things, including plastics, paints, detergents, fertilizer, pesticides, synthetic textiles and rubbers, cosmetics, medicines, industrial chemicals, and a host of other things. Among products made of oil-based polymers found in many American homes are plastic toys, mats, shoes, balls, storage boxes, lawn tools, plastic chairs, clothes, bicycle helmets, dishes, cups, and furniture. Kevlar is a petroleum-based material.

In 1897, Germans produced the first synthetic indigo from coal-tar derivatives. This triggered a boom in blue fashions. The first true synthetic fabric, nylon, was invented by Dupont in 1935. Synthetic fibers are polymers (molecules based in carbon and linked in long chains), which can be meted and dissolved and drawn into thread. The petrochemical industry was given a big boost on World War II, when chemical substitutes were needs for things in short supply such as rubber.

Petrochemicals are widely used in agriculture in fertilizer and pesticides as well as for fuel to run tractors, trucks and other machinery. By one estimate a steer weighing 1,250 pounds need 283 gallons of fuel for things like fertilizer to nourish the cornfields and diesel used to run machinery on the farm.

PET (polethylene terephthalate) bottles make up about 0.25 percent of total worldwide oil consumption. One bottle is made of 24 grams of ethylene and paraxylene, two chemicals derived from crude oil. The bottles are a primary source of litter. Even worse is the energy water on transporting on mineral water great distances when water that is just as good is available for 1/10,000th the price from the tap. An activist with Friend of Earth told the Times, “Bottled water ranks alongside patio heaters as one of the absurd producers of greenhouse gas emissions.”

Petroleum Supply and Storage

According to Cambridge Energy research Associates there was 4.82 trillion barrels of oil in the world today. Of this 1.08 trillion barrels has already been consumed, 760 billion barrels is from conventional sources, 1.07 trillion barrels has yet to be discovered and 1.91 trillion barrels comes from unconventional sources such as the Arctic and deepwater sources enhanced oil recovery, extra heavy oil and oil shale.

Worldwide demand is around 85 million barrels a day.

Oil is one of the most expensive commodities to store. Since even speculators are required by some markets to physically purchase unused oil must kept in storage tanks or tankers kept off shore. This is expensive and poses environmental risks to coastlines. The easiest, cheapest and safest place is to store it is to keep it in the ground. [Source: Investopedia, The Industry Handbook: The Oil Services Industry]

Millions of tons was stored in tankers after the price of oil propped from $147 a bell to around $60 a barrel in 2008 and 2009 and traders were able to buy it a lower price and sell for it guaranteed high price in the future. [Ibid]

Some tankers as long a three football fields. The largest tankers are called VLCC, very large crude carrier. The largest ones carry over 2 million barrels. [Ibid]

Image Sources:

Text Sources: World Almanac, United States Geological Survey (USGS) Minerals Resources Program, Investopedia Industry Handbooks, U.S. Energy Information Administration, Department of Energy and National Geographic articles. Also the New York Times, Washington Post, Los Angeles Times, Smithsonian magazine, Natural History magazine, Discover magazine, Times of London, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated March 2011

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