Crude oil

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Crude oil is a naturally occurring mixture of hydrocarbons in liquid form located underground and remains a liquid as it is extracted from geological formations. The term crude is used because the oil must be refined before it can be used as a consumable fuel, such as gasoline, or to make petroleum-derived products, including consumer products such as dishwashing soap, tires, deodorant, crayons, and more. Types of crude oil, which include light, intermediate, and heavy oil, are classified by where the oil is from and its weight and viscosity.[1][2]

This article outlines background information about crude oil and its uses, the cost of producing a barrel of crude oil, and U.S. crude oil production and reserve data, among other information. For more information about petroleum, including its economic and environmental impact, see this article.

Background

Composition

The products that can be refined from a barrel of crude oil

The physical composition of crude oil depends on where it is found. In general, crude oil consists of the following hydrocarbons, though the chemical composition of crude oil varies by region:[3][4]

  • 83 to 87 percent carbon;
  • 10 to 14 percent hydrogen;
  • 0.1 to 2 percent nitrogen;
  • 0.05 to 1.5 percent oxygen;
  • 0.05 to 6 percent sulfur; and
  • Less than 0.1 percent sulfur

Uses of crude oil

See also: Gasoline prices

Crude oil is used as a transportation fuel, a heating source for buildings, a source of electricity generation, road oil, and a resource used to make plastics and other synthetic materials. According to the U.S. Energy Information Administration, approximately 48 percent of the 7.19 billion barrels of U.S. petroleum consumed in 2016 was used as motor vehicle gasoline. Approximately 20 percent was used as heating oil, and 8 percent was used as jet fuel.[5]

Power plants use crude oil to generate electricity. After crude oil has been refined, it is shipped (by rail, truck, ship, or pipeline) to oil-fired power plants. The oil is burned in a boiler, which converts its chemical energy into heat. The heat is used to rotate a turbine to generate electricity. Transmission lines then take electricity from power plants and deliver it to consumers. The system for generating and delivering electricity—known as the electric grid—can be seen in the image below.[6]

An example of a North American energy grid

Refining

Refining involves altering crude oil into usable, consumable products such as gasoline, diesel, jet fuel, fuel oil, and other petroleum-derived products. When crude oil is refined, it is heated until it becomes a gas. The gas is then transferred into a distillation container where it is cooled. As the gas cools into liquid form, the liquid is pulled off at certain heights depending on the desired end product. According to the U.S. Energy Information Administration, one barrel of crude oil (42 gallons) produces approximately 19 gallons of gasoline, 12 gallons of diesel as well as some remaining petroleum to be used in other consumer products.[7]

The image below shows the different heights at which refiners draw out crude oil and the resulting petroleum products.[8][9]

The refining process

As of January 1, 2016, the United States had a refinery capacity of 18.3 million barrels of crude oil per day at 149 U.S. refineries. The map below shows crude oil refineries by state in 2016.[10][11][12]

Crude oil refineries by state, 2016

Click the [Show] button on the table below to see crude oil refining capacity by state as of January 1, 2016.

Crude oil transportation

Above is a map of crude oil by rail shipments from the U.S. Energy Information Administration. Click to enlarge.

U.S. refining capacity for crude oil is mainly located along the Gulf Coast, East Coast, and West Coast. Railroads, pipelines, trucks, and barges are used to transport crude oil.[13]

Rail

According to the U.S. Energy Information Administration, 142.09 million barrels of crude oil were delivered by rail inside the United States in 2016. Approximately 33 million barrels of crude oil were imported into the United States from Canada by rail.[14][15][16]

Pipelines

According to the U.S. Energy Information Administration, 934.8 million barrels of crude oil were transported by pipeline throughout the United States in 2016. According to the American Petroleum Institute, the United States had over 190,000 miles of petroleum pipelines, including crude oil pipelines as of 2013.[17][13]

The map below shows crude oil pipelines in the United States as of 2016 according to the U.S. Energy Information Administration.

Crude oil pipelines in the United States as of 2016 (Source: U.S. Energy Information Administration).

Cost to produce a barrel of crude oil

Based on data from Rystad Energy, an independent oil and gas consulting services and data firm, a January 2016 report from The Wall Street Journal found that on average it cost oil producers $23.35 to produce one barrel of oil from a shale well (unconventional) and $20.99 to produce a barrel of oil from a non-shale well (conventional) in the United States in 2016. The report used four classifications to calculate the cost of producing a barrel of oil: capital costs, production costs, taxes, and administrative/transportation costs. For both non-shale wells and shale wells, the highest costs were capital costs, which are the one-time costs of exploring a new well, developing the site around a well, and installing pipelines or other infrastructure. Production costs involve extracting the oil and paying employee salaries. Taxes vary by state, though The Wall Street Journal found that taxes compose 27.5 percent of the total cost to produce a barrel of oil from a shale well and 24 percent of the cost to produce a barrel of oil from a non-shale well. States levy a tax on the amount of oil or gas produced; this tax may also vary based on the market price for oil. Other states may charge an impact fee to drill a well. Administrative and transportation costs accounted for the remainder of the costs.[18][19]

Shale well costs, 2016.png
Non-shale well costs, 2016.png
Cost to produce a barrel of oil
Shale Non-shale
Component Cost Percent Cost Percent
Capital $7.56 32.40% $7.70 36.70%
Production $5.85 25.10% $5.15 24.50%
Taxes $6.42 27.50% $5.03 24.00%
Administrative/Transportation $3.52 15.10% $3.11 14.80%
Total $23.35 -- $20.99 --
Source:The Wall Street Journal, "Barrel Breakdown"

Production

In 2016, U.S. crude oil production totaled approximately 3.24 billion barrels. See the charts, map, and table below for more detailed information about U.S. crude oil production.[20]

The chart below shows U.S. crude oil production from 1859 to 2016.

Crude oil production in the United States from 1859 to 2016
Crude oil production by state, 2016
A darker color indicates more production; scroll over a state to view the percentage of total U.S. crude oil production it had in 2016.
Note: This section includes oil and gas production from private and state-owned lands. Information on oil and gas production on federal lands is available here.

Click the [Show] button on the table below to see U.S. crude oil production by state from 2007 to 2016.

Reserves

The map below show proven crude oil proven reserves by state in 2015 according to the U.S. Energy Information Administration (EIA). Proven (or proved) reserves are defined as "estimated volumes of hydrocarbon resources that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions." Proven reserves change over time due to changing prices, technological advances, and discoveries of previously unknown reserves. For example, the official estimate of proved U.S. oil reserves was approximately 30 billion barrels in 1980. From 1980 to 2010, U.S. oil production rose to more than 77 billion barrels of oil, a 156 percent increase from the 1980 estimate. Other 2015 estimates concluded that the United States has more than 1.4 trillion barrels of recoverable oil in Alaska and in the Rocky Mountains and that North America has more than 1.7 trillion barrels of recoverable oil. As a comparison, Saudi Arabia had approximately 260 billion barrels of proved oil reserves as of 2015.[21][22]

Crude oil reserves by state, 2015
A darker color indicates more reserves; scroll over a state to view the percentage of total U.S. crude oil reserves it had in 2015.

Click the [Show] button on the table below to see U.S. crude oil reserve estimates by state from 2007 to 2015.

Crude oil export ban

See also: Crude oil export ban

The crude oil export ban prohibited most crude oil exports from the United States to other countries. It was implemented in 1975 and lifted in December 2015.[23][24]

In 1973, Arab members of the Organization of the Petroleum Exporting Countries (OPEC), an intergovernmental organization, imposed a ban on petroleum exports to the United States and to other countries that supported the state of Israel during the 1973 Arab-Israeli conflict. OPEC also cut oil production, leading to rising gasoline prices in the United States. At the time of the embargo, U.S. policies encouraged oil imports over domestic oil production. In response to the embargo and higher domestic gasoline prices, Congress passed the 1975 Energy Policy and Conservation Act, which directed the president to ban crude oil exports except for select types of oil.[25][26][27][28][29][30]

The chart below shows changes in U.S. crude oil exports and imports.[31][32]

Source: U.S. Energy Information Administration
Source: U.S. Energy Information Administration (click to enlarge)

Post-ban crude oil exports

From January 2016 to May 2016, crude oil exports from the United States to other countries totaled 501,000 barrels per day. Canada received most of the exported crude oil. The graph above shows crude oil exports to Canada in dark green and crude oil exports to other nations in light green. Curacao, the Netherlands, Japan, Italy, Marshall Islands, France, the United Kingdom, the Bahama Islands, China, Panama, and other countries also imported U.S. crude oil during this period.[33]

State budgets

The price of oil decreased approximately $100 per barrel in late summer 2014 to under $50 a barrel in August 2016. Price declines can affect state budgets, including Western states that use on oil and gas revenue for state spending.[34][35]

History of crude oil use

Oil was previously used by settlers in North America as a grease for tools and wagons. Prior to the Industrial Revolution, rock oil from shale was used in the form of kerosene for lamps. Drilling for oil began in the United States in the mid-1850s. A drill was first used to extract oil on August 27, 1859. The Pennsylvania Rock Oil Company of Connecticut was established to drill for oil around Titusville, Pennsylvania, after oil was found floating on the surface of a nearby body of water. Sometime after 1859, John D. Rockefeller built a small oil refinery, and in 1867 established what would become the Standard Oil Company, which became the largest oil refining company in Pennsylvania by 1870. By 1880, the United States accounted for 85 percent of global oil production.[36][37][38][39]

During the First World War (1914-1918), the United States created the Fuel Administration to coordinate oil shipments to the Allied countries. Oil production continued during the Great Depression despite falling prices during this period. Demand for oil also increased during the Second World War (1939-1945), After 1945, the United States became a net exporter of crude oil. By 1950, the United States began importing more crude oil as domestic consumption rose.[36][39][40]

See also

Footnotes

  1. ↑ U.S. Energy Information Administration, "What is the difference between crude oil, petroleum products, and petroleum?" December 8, 2014
  2. ↑ U.S. Energy Information Administration, “Glossary, C,” accessed January 29, 2014
  3. ↑ About.com, "Chemical Composition of Petroleum," May 19, 2014
  4. ↑ Society of Petroleum Engineers, "Crude oil characterization," September 17, 2013
  5. ↑ U.S. Energy Information Administration, "FAQ: What are the products and uses of petroleum?" accessed April 12, 2017
  6. ↑ U.S. Environmental Protection Agency, "Oil," September 25, 2013
  7. ↑ U.S. Energy Information Administration, "Frequently Asked Questions," accessed March 18, 2014
  8. ↑ U.S. Energy Information Administration, "What fuels are made from crude oil?" June 19, 2014
  9. ↑ American Fuel and Petrochemical Manufacturers, "The Refining Process," accessed March 26, 2015
  10. ↑ U.S. Energy Information Administration, "Refinery Capacity Report," January 1, 2016
  11. ↑ U.S. Energy Information Administration, "Refinery Capacity Report," January 1, 2015
  12. ↑ U.S. Energy Information Administration, "Number and Capacity of Petroleum Refineries," June 19, 2015
  13. ↑ 13.0 13.1 Congressional Research Service, "U.S. Rail Transportation of Crude Oil: Background and Issues for Congress," December 4, 2014
  14. ↑ U.S. Energy Information Administration, "Rail shipments of oil and petroleum products through October up 13% over year-ago period," November 13, 2014
  15. ↑ Energy in Depth, "Greens Go Way Off-Track in Crude-by-Rail Comments," December 3, 2014
  16. ↑ U.S. Energy Information Administration, "Movements of Crude Oil and Selected Products by Rail," accessed April 12, 2017
  17. ↑ U.S. Energy Information Administration, "Movements by Pipeline between PAD Districts," accessed April 12, 2017
  18. ↑ The Wall Street Journal, "Barrel Breakdown," April 15, 2016
  19. ↑ Market Realist, "War of Words: OPEC Nations and the Crude Oil Market," January 13, 2016
  20. ↑ U.S. Energy Information Administration, "Crude Oil Production," accessed April 12, 2017
  21. ↑ U.S. Energy Information Administration, "U.S. Crude Oil and Natural Gas Proved Reserves," December 19, 2014
  22. ↑ U.S. Energy Information Administration, "Crude Oil Proved Reserves, Reserves Changes, and Production," December 4, 2014
  23. ↑ The Hill, "Spending deal to lift oil export ban," December 15, 2015
  24. ↑ The Economist, "America lifts its ban on oil exports," December 18, 2015
  25. ↑ The Washington Post, "U.S. oil exports have been banned for 40 years. Is it time for that to change?" January 8, 2014
  26. ↑ Congressional Research Service, "Energy Policy:Historical Overview, Conceptual Framework, and Continuing Issues," December 21, 2004
  27. ↑ U.S. Department of State, "Milestones:1969-1976," October 31, 2013
  28. ↑ U.S. Energy Information Administration, "Statement of Adam Sieminski Administrator Energy Information Administration U.S. Department of Energy Before the Committee on Energy and Commerce Subcommittee on Energy and Power U.S. House of Representatives," December 11, 2014
  29. ↑ The Brookings Institution, "Changing Markets Economic Opportunities from Lift the U.S. Ban on Crude Oil Exports," September 2014
  30. ↑ Forbes, "End Of Crude Oil Export Ban Could Have Negative Unintended Consequences," December 22, 2015
  31. ↑ University of Oklahoma, "Hydraulic Fracturing and Water Resources," accessed March 12, 2014
  32. ↑ U.S. Energy Information Administration, "Hydraulic fracturing accounts for about half of current U.S. crude oil production," March 15, 2016
  33. ↑ U.S. Energy Information Administration, "U.S. crude oil exports are increasing and reaching more destinations," August 16, 2016
  34. ↑ Bloomberg Businessweek, "The Party's Over in Alaska," May 6, 2016
  35. ↑ CQ Roll Call, "State Track," Spring 2016
  36. ↑ 36.0 36.1 History, "Oil Industry," accessed August 18, 2016
  37. ↑ Woods Hole Oceanographic Institute, "Natural Oil Seeps," accessed August 19, 2016
  38. ↑ Massachusetts Institute of Technology, "Lecture #2: The Global Energy Industry," accessed August 19, 2016
  39. ↑ 39.0 39.1 Council on Foreign Relations, "Timeline: Oil Dependence and U.S. Foreign Policy," accessed August 19, 2016
  40. ↑ Gale Cengage Learning, "Oil," accessed August 31, 2016
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