WHAT IS CRUDE OIL? READ ABOUT ITS SCIENCE, GEOGRAPHY AND POLITICS.

How crude oil was formed? How is processed and classified? 

The reasons for sudden decline in prices, What is Saudian strategy and what USA faced in Corona situation? How Gulf War took place?


Importance of Crude Oil

The colorless liquid , looks even lighter than water and cannot survive in open environment , it will disappear in few seconds if keep it in your palm. Although  it is so redolent that one can smell it from far distant yet it looks so harmless and idle if looked at first glance. No one can imagine , if not aware of petroleum properties, that it is full of energy. A source of energy that has changed the entire world. Still, there is no alternate source of energy which could fully replace crude oil. One litre of diesel contains enough energy to move a 40 tone truck three kilometers—a feat that would be impossible with battery-electric propulsion for example.

Crude oil has not changed the whole picture of the world but it has benefited the countries themselves who are enriched with this assets. In the 19th century , the countries which found this treasure in form of liquid, within their territories  became the wealthiest nations of the world.

After Invention of petroleum based engine in 1872, a new traffic system took place in shape of railway train, trucks, lorries, buses, cars and airplanes. Hence the importance of oil enhanced rapidly. The demand of crude oil grew more and more and the search of oil reservoirs expanded strongly. A battle to produce oil on larger scale, started among different countries. It not only gave them heavy financial benefit but they grew stronger politically as well.

 History:

Petroleum literally means "rock oil." It is the second most abundant liquid on Earth. The raw form of petroleum product is called “Asphalt” The history of use of Asphalt is very old, in the ancient times

about 4000 B.C , it was used as mortar between building stones as early as 6000 years ago. Asphalt was also used as a waterproofing agent for baths, pottery and boats (Purdy, 1957). The Babylonians caulked their ships with asphalt. In Mesopotamia around 4000 B.C., bitumen - a tarry crude - was used as caulking for ships, a setting for jewels and mosaics, and an adhesive to secure weapon handles. Egyptians used it for embalming, and the walls of Babylon and the famed pyramids were held together with it. About 2000 years ago the Chinese used oil and natural gas for heat and light. Bamboo pipes carried gas into home.

Ancient Persians, 10th century Sumatrans and pre-Columbian Indians all believed that crude oil had medicinal benefits. The famous traveler Marco Polo found it, used in the Caspian Sea region to treat camels for mange, and the first oil exported from Venezuela (in 1539) was intended as a gout treatment for the Holy Roman Emperor Charles V.4

A Maidu acorn-meal brush, resting on a stone mortar filled with acorn meal. The brush is made of soap-root fibers glued together with asphalt and laced with string.9 Homepage of the Maidu Mechoopda Tribe. The American Indians collected oil for medicines. The American settlers found its presence in the water supplies a contamination, but they learned to collect it to use as fuel in their lamps.

Indians near Sacramento used asphalt to waterproof their baskets and to glue fibers of a soap-root brush to form a handle with twine. Also, hard asphalt was used to make blades for knives and arrowheads. Their counterparts on the coast in the Mattole Valley in Northern California also harvested the sticky, dark material that made baskets airtight, secured arrowheads to wooden shafts. Until the late 19th century, an oil find often was met with disinterest or dismay. Pioneers who settled the American West dug wells to find water or brine, a source of salt; they were disappointed when they discovered oil.

However, several historical factors changed the situation. The kerosene lamp, invented in 1854, ultimately created the first large-scale demand for petroleum. (Kerosene first was made from coal, but by the late 1880s most was derived from crude oil.) In 1859, at Titusville, Penn., Col. Edwin Drake drilled the first successful well through rock and produced crude oil. it was the birth of the modern petroleum industry. He sold his "black gold" for $20 a barrelas , which was served as medicine for colds, coughs, burns and cuts.

Formation of Crude Oil:

Petroleum, also called crude oil, is a fossil fuel. Like coal and natural gas, petroleum was formed from the remains of ancient marine organisms.  Millions of years ago, algae and plants lived in shallow seas. After dying and sinking to the seafloor, the organic material mixed with other sediments and was buried. Over millions of years under high pressure and high temperature, the remains of these organisms transformed into what we know today as fossil fuels. Coal, natural gas, and petroleum are all fossil fuels that formed under similar conditions.

Today, petroleum is found in vast underground reservoirs where ancient seas were located. Petroleum reservoirs can be found beneath land or the ocean floor. Their crude oil is extracted with giant drilling machines

Chemistry:

Crude oil is composed of hydrocarbons, which are mainly hydrogen (about 13% by weight) and carbon (about 85%). Other elements such as nitrogen (about 0.5%), sulfur (0.5%), oxygen (1%), and metals such as iron, nickel, and copper (less than 0.1%) can also be mixed in with the hydrocarbons in small amounts.

How is crude oil turned into finished products?

Crude oil is often a dark, sticky liquid that cannot be used without changing it. The first part of refining crude oil is to heat it until it boils. The boiling liquid is separated into different liquids and gases in a distillation column. These liquids are used to make petrol, paraffin, diesel fuel etc.

Crude oil is a mixture of different chemical called hydrocarbons. The boiling oil turns into a mixture of gases in the column. The gases flow up the column which is hottest at the bottom and cooler at the top. The gases cool down as they go up the column until they condense (turn back into liquid again). The separated liquids and gases, after cleaning and further processing, are used to make many products.

Liquids from refining oil still have to be changed to make them more useful. Sometimes it's to make them clean enough to be used. Sometimes it's to turn some of the unwanted liquids into things people want to buy. The heavier liquids are in less demand from customers so are turned into lighter products that are in demand. One of the processes is called catalytic cracking. It breaks down some of the heavy liquids from the distillation column. The heavy liquids are changed into simple and more useful liquids and gases. Cracking is just one of many chemical changes in an oil refinery.

Major Products obtained from Crude Oil:

These petroleum products include gasoline, heating oil, jet fuel, petrochemical feed stocks, waxes, lubricating oils, and asphalt. Steel Oil is used for transportation, petroleum products, and plastics. The Major Products are:

• Liquefied Petroleum Gas (LPG)

• Bitumen.

• Kerosene.

• Diesel.

Classification of oil (Geographically):

Oil is drilled all over the world. However, there are three primary sources of crude oil that set reference points for ranking and pricing other oil supplies: Brent Crude, West Texas Intermediate, and Dubai and Oman.

1. Brent Crude is a mixture that comes from 15 different oil fields between Scotland and Norway in the North Sea. These fields supply oil to most of Europe.

2. West Texas Intermediate (WTI)  is a lighter oil that is produced mostly in the U.S. state of Texas. It is “sweet” and “light”—considered very high quality. WTI supplies much of North America with oil.

3. Dubai crude, also known as Fateh or Dubai-Oman crude, is a light, sour oil that is produced in Dubai, part of the United Arab Emirates. The nearby country of Oman has recently begun producing oil. Dubai and Oman crudes are used as a reference point for pricing Persian Gulf oils that are mostly exported to Asia.

4. The OPEC Reference Basket is another important oil source. OPEC is the Organization of Petroleum Exporting Countries. The OPEC Reference Basket is the average price of petroleum from OPEC’s 12 member countries: Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela

5. Russian Export Blend, the Russian benchmark crude, is a mixture of several crude grades used domestically or sent for export. Russian Export Blend is a medium, sour crude oil with an API gravity of approximately 32 and a sulfur content of approximately 1.2%. Its spot price is reported at Augusta, Italy, and Rotterdam, the Netherlands, which act as the two primary delivery points.

Crude Oil and WAR: 

There is method of drilling called “Directional drilling” it involves drilling vertically to a known source of oil, then veering the drill bit at an angle to access additional resources. Accusations of directional drilling led to the first Gulf War in 1991. Iraq accused Kuwait of using directional drilling techniques to extract oil from Iraqi oil reservoirs near the Kuwaiti border. Iraq subsequently invaded Kuwait, an act which drew international attention and intervention. After the war, the border between Iraq and Kuwait was redrawn, with the reservoirs now belonging to Kuwait.

Current decline in Oil Price: 

On 8 March 2020, Saudi Arabia announced unexpected price discounts of $6 to $8 per barrel to customers in Europe, Asia, and the United States. The announcement triggered a free fall in oil prices and other consequences that day, with brent crude falling by 30%, the largest drop since the Gulf War.

Further, in April 2020, Saudi Arabia also announced its official crude pricing (OSP) for May, selling oil more cheaply to Asia while keeping prices flat for Europe and raising them for the United States, after OPEC and its allies agreed the biggest output cut deal 

How oil prices dropped below zero in USA:

The price of US crude has gone negative in Apirl,2020 for the first time in history. How did it happen – and what does it mean? Oil producers are having to pay buyers to take oil off their hands because their storage facilities are full.

US oil prices turned negative for the first time in history on Monday amid the deepest fall in demand in 25 years, due to covid-19. A flood of unwanted oil in the market caused the West Texas Intermediate (WTI), the benchmark price for US oil, to plummet to almost –$40 a barrel after the fastest plunge in history. That meant producers were paying buyers to take oil off their hands.

1. Why have US oil prices turned negative?The price of oil has been steadily falling across global markets since corona virus first broke out in China at the end of 2019. Since then, the shutdown of major economies and travel routes to curb the spread of the virus has wiped out oil demand as transport has ground to a halt. But oil producers have continued to pump crude from their wells, causing a catastrophic imbalance between oversupplied oil and the biggest slump in demand for 25 years.

2. What do ‘negative prices’ mean?In short: oil producers are paying buyers to take the barrels of oil off their hands because storage facilities are full to the brim. At the market’s lowest point on Monday, an oil company might have paid about $40 for every barrel of oil someone was willing to take. A buyer would need to factor in the cost of transporting oil from the well to a shipping port, or a storage facility, where it may need to be held for up to six months, at significant cost. They would also need to bet that oil prices will rise later this year to make a return on the “investment”. No oil company wants to “sell” their crude at a loss, so many producers are likely to shut their wells until the market recovers.

3. Why are oil prices in other countries still above zero?The world’s oversupply of oil is particularly acute in the US, which produces around 10m barrels of oil every day, because oil storage tanks have filled up, leaving oil companies desperate to sell their surplus barrels. In other regions, including the UK, oil prices are still above zero in part because they face lower transport costs and easier access to ports. Still, no oil market has remained unscathed. The international benchmark oil price, known as Brent crude, is still above $20 a barrel, but has fallen by two-thirds since January to 18-year lows.

4. What does this mean for petrol prices?Petrol prices are likely to fall sharply this year due to the sudden collapse of oil prices and the long road to market recovery that probably lies ahead. But it is worth keeping in mind that the price paid at the pump is not a perfect reflection of the oil markets because petrol and diesel prices include government taxes and a profit margin for the seller. The negative oil prices seen in the US will be short-lived, so no one should expect to be paid for filling up their car.

5. Are prices likely to recover? The negative US oil price referred specifically to the price for crude delivered in May, the month in which oil demand is expected to be lowest and supplies are expected to be highest. From Tuesday, oil traders will begin trading barrels for delivery in June in earnest, and these are expected to fetch far higher prices. A meaningful recovery of oil market prices will depend on how quickly demand for transport fuels increases – a speedy end to lock-down would accelerate a market price recovery, but a slow emergence from the Covid-19 crisis could mean further financial pain for oil producers until 2021.

Below is the country wise chart for top 50 oil producers, showing the oil production per day / per capita:-

S.NO	Country	2019 (bbl/day)	2017 (bbl/day/million people)
0	World production	80,622,000	10,798
1	United States	15,043,000	35,922
2	Saudi Arabia (OPEC)	12,000,000	324,866
3	Russia	10,800,000	73,292
4	Iraq (OPEC)	4,451,516	119,664
5	Iran (OPEC)	3,990,956	49,714
6	China	3,980,650	2,836
7	Canada	3,662,694	100,931
8	U.A.E(OPEC)	3,106,077	335,103
9	Kuwait (OPEC)	2,923,825	721,575
10	Brazil	2,515,459	12,113
11	Vanzuela(OPEC)	2,276,967	69,914
12	Mexico	2,186,877	17,142
13	Nigeria (OPEC)	1,999,885	10,752
14	Angola (OPEC)	1,769,615	61,417
15	Norway	1,647,975	313,661
16	Kazakhstan	1,595,199	88,686
17	Qatar	1,522,902	500,000
18	Algeria (OPEC)	1,348,361	33,205
19	Oman	1,006,841	217,178
20	Libya (OPEC)	1,003,000	159,383
21	United Kingdom	939,760	14,284
22	Colombia	897,784	18,452
23	Indonesia	833,667	3,192
24	Azerbaijan	833,538	85,710
25	India	715,459	554
26	Malaysia	661,240	21,202
27	Ecuador (OPEC)	548,421	33,470
28	Argentina	510,560	11,644
29	Romania	504,000	25,469
30	Egypt	490,000	5,166
31	Congo, (OPEC)	308,363	60,168
32	Vietnam	301,850	3,194
33	Australia	289,749	12,010
34	Thailand	257,525	3,667
35	South Sudan	255,00	4,932
36	Turkmenistan	230,779	40,759
37	Guinea (OPEC)	227,000	125,068
38	Gabon (OPEC)	210,820	106,528
39	Denmark	140,637	24,369
40	Chad	110,156	7,393
41	Brunei	109,117	257,959
42	Ghana	100,549	3,564
43	Cameroon	93,205	3,983
44	Pakistan	80,000	400
45	Italy	70,675	1,189
46	Timor-Leste	60,661	47,839
47	Trinidad and Tobago	60,090	44,054
48	Bolivia	58,077	5,334
49	Papua New Guinea	56,667	7,013
50	Uzbekistan	52,913	1,682