Crude Petroleum and Petroleum Products

Crude petroleum, a complex volatile mixture of hydrocarbons with some sulfur, nitrogen, oxygen, and trace metals, is the largest single source of energy in the world, accounting for approximately 35-40% (in oil equivalents) of the energy consumed in the world. It is also the building block for a large number of chemical products consumed globally.

OPEC currently accounts for approximately 73% of total world oil reserves, but Venezuela now holds the single largest share at 18%, having tripled their reserve total from just four years ago. Saudi Arabia holds the second-largest share at 16%. The Middle East retains the regional share title with 48%, down from 56% share two years ago. By virtue of Venezuela's reserve gains, Central and South America has displaced North America for second place, at 20% of world reserves, while North America is now third at 13%, in spite of the U.S. gain in reserves due to tight oil and oil sands formations.

Total world oil production was estimated at nearly 74.2 million barrels per day in 2012, a 5% increase from the low point in 2009 as a result of the global economic recession. With world reserves estimated at over 1.65 trillion barrels as of January 1, 2012, the 2012 production levels could theoretically be sustained for more than 60 years.

The following pie charts show world reserves of crude petroleum:

Regional oil production is disproportionate to regional oil reserves. The United States, with less than 2% of world reserves, produced nearly 8% of the world's oil in 2012, while Saudi Arabia, with an estimated 16% of world proved reserves, produced only 12% of the world's oil in 2012. The major growth regions for crude oil production over the next few years should be Russia, the Caspian Basin, non-OPEC Africa, Central and South America and the United States. Development in nonconventional oil production—tight oil in the United States and oil sands in Canada—will continue to grow over the next ten years.

Crude oil must be processed at a refinery to separate it into useable products. The initial processing operation at a petroleum refinery is distillation: atmospheric distillation isolates low-boiling fractions (up to about 340°C) and vacuum distillation separates less-volatile, higher-boiling components. During atmospheric distillation, the crude feedstock is separated into components of discrete boiling ranges; liquid products include light straight-run gasoline/naphtha, heavy naphtha, kerosene and light gas oil. Typical products of vacuum distillation are vacuum gas oil (used as feed in catalytic cracking units) and feedstocks for petroleum lubricants, asphalt, coke and other heavy hydrocarbon compounds. Yields vary, depending on the type of crude oil feedstock, and the desired end products. U.S. refineries are run to produce primarily gasoline, while most other regions generate distillate fuel oils as the major fraction, for home heating, industrial fuel and diesel fuel.

After the impact of the world economic slowdowns in 2012 and 2013, oil demand will grow 1-2% in most end-use sectors. The transportation sector will continue its increased demand growth for oil, even with the introduction of environmentally friendly vehicles and energy alternatives such as gas to liquids, ethanol and biodiesel. As economies in developing regions improve, countries will continue to convert from traditional fuels for residential and commercial use (such as wood burning for heating and cooking) to diesel-fired electricity. Demand for residual fuels will increase only slightly, as heavier fuels give way to greater gasoline demand and industry converts to cleaner burning fuels and alternative sources for energy generation.

As crude petroleum is one of the world's most widely traded commodities, it is impacted by social, political and economic factors. The world economy and corresponding oil consumption responded strongly in 2010 as first China and then other industrialized nations began to recover economically. Oil prices rose more than 30% as a result. During 2011 the world economic improvement consolidated, oil consumption solidified, inventories fell and producers showed supply discipline, which drove U.S. prices up another 25% to over $100 per barrel. Prices leveled in 2012 as the world economic recovery stumbled due to the financial debt crisis in Europe and as the Chinese economy took a growth pause, falling short of its long trend of double-digit GDP increases. Average prices for oil showed no increase in 2012.

The tight oil revolution is only recently transforming North American liquids and natural gas production. Like shale gas, tight oil holds the potential to transform the development of liquids supplies. Oil in the Dakota Bakken and Texas Eagle Ford fields is being extracted from shale where the oil is trapped by formations that do not allow the oil to flow easily. This so-called "tight oil" is being freed by advances in hydraulic fracturing (fracking) technology—similar to that used for shale gas mining—which allow this oil to be produced. The success of shale gas produced a glut of supply, causing natural gas prices to plummet, so operators began to focus attention on oil and liquids-rich gas formations. Within three years, U.S. drilling activity—80% of which had targeted gas during 2008—shifted to 60% targeting oil. The shift has helped to reverse a long decline in U.S. onshore oil production. Tight oil formations are most often associated with the United States, but these types of oil-bearing formations are increasingly being discovered in other world regions, including Syria, the northern Persian Gulf region, Oman, western Siberia in Russia, Australia, and Mexico. Some exploration is ongoing in China as well.

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