INTRODUCTION

The word petroleum (literally “rock oil” from the Latin petra , “rock” or “stone,” and oleum, “oil”) was first used in 1556 in a treatise published by the German mineralogist Georg Bauer, known as Georgius Agricola.Petroleum's importance to humankind took a giant leap in the late 1800's when it replaced coal as the primary fuel for the machines of the industrial revolution. In today's industrialized society, petroleum means power. It provides the mechanical power to run machines and industries and also the political power that comes from being able to shut down the machines and industries of those who depend on you for their oil supply.Petroleum, complex mixture of hydrocarbons that occur in the Earth in liquid , gaseous, or solid forms. The term is often restricted to the liquid form, commonly called crude oil, but as a technical term it also includes natural gas and the viscous or solid form known as bitumen, which is found in tar sands. The liquid and gaseous phases of petroleum constitute the most important of the primary fossil fuels.Liquid and gaseous hydrocarbons are so intimately associated in nature that it has become customary to shorten the expression “petroleum and natural gas” to “petroleum” when referring to both.

PETROLEUM MODERN HISTORY When Colonel Edwin Drake drilled the first successful oil well in Titusville, Pennsylvania in 1859, few had any idea of how petroleum would change the world. Drake and his backers were looking for a source of kerosene to be used for lighting fuel. For most of the 19th century, gasoline was merely a byproduct of the production of kerosene, with few commercial uses. The remarkable transformation in mobility of people and goods began only after the beginning of the new century.

The primary market for oil had begun to disappear when Thomas Edison invented the light bulb and created the electrical generation industry. In 1882, Edison threw a switch to start the first commercial electrical generating plant and, by the turn of the century, there were over 18 million light bulbs in use in the U.S. alone. The oil industry lost its major market.

The invention of the automobile changed all that. At the beginning of 20th century there were about 8,000 registered vehicles, and by 1920 there were 23 million cars. However, it was not clear whether gasoline engines would be used to fuel the automobile. Early models were powered by steam and electricity as well as gasoline; in the early 1900s most were electric. Yet, gasoline-powered engines turned out to be the most practical design because battery-powered engines did not have sufficient range. With the construction of a network of gasoline filling stations, the infrastructure was put in place to ensure a consistent supply of fuel. Therefore, gasoline-powered automobiles captured the market.

World War I irrevocably changed the role of petroleum in the world. When the war began, military planning focused on the horse as the primary mode of transportation. It assumed that one horse was needed for every three soldiers, which provided a logistical problem since the horses

required ten times as much food. When Britain entered the war, it had only about 800 motor vehicles, most of which were requisitioned from private citizens.

By the end of the war, Britain had 56,000 trucks and 36,000 cars. In addition, the U.S. shipped over 50,000 vehicles to Europe and, in one and a half years, built 15,000 planes. Motorized transport began to dramatically change the nature of war. The development of the airplane and the tank, which was first used at the Battle of the Somme in 1918, provided both mobility and power that was unprecedented in the history of warfare.

Oil began to provide a critical advantage that changed how nations regarded this natural resource. Previously, oil was seen as a commodity brought to market by a few entrepreneurs; after WWI, it was regarded as a strategic mineral for which supplies had to be ensured. During the war, Britain had converted their ships from coal-burning to oil-powered to give them increased speed and mobility. During this same time, Germany’s submarine attacks in the Atlantic cut off Britain’s oil shipments and nearly brought defeat.

After the war, one of the priorities of both Britain and France was to ensure their access to oil, particularly in Mesopotamia, where oil had been discovered in 1908. Division of spheres of interest in that region were heavily influenced by the potential of oil within the region. However, until the 1940s, the United States was the world’s leader in oil production, producing 65 percent of the world’s oil. In 1940, the Middle East accounted for less than 5 percent of total production.

This changed dramatically with the discovery of “supergiant” oil fields in Kuwait and Saudi Arabia in the 1930s and 1940s. Throughout the world, a growing reliance on Middle East oil became a serious concern. In the U.S., it was due to the oil shocks of the 1970s. The first shock occurred in 1973 after Egypt and Syria attacked Israel. The U.S. had furnished arms to Israel and the Middle Eastern countries responded by imposing an oil embargo on the U.S., which led to long lines at gasoline stations. The U.S., led by President Gerald Ford, launched a national effort to reduce dependence on Middle Eastern oil through “Project Independence,” a ten-year plan to build 150 coal-fired power plants and 200 nuclear plants, in addition to building synfuel plants. This project was meant to ensure that the U.S. had a domestic supply of critical energy supplies; however, after the oil shortages subsided, so did much of the interest in the new initiatives.

The second oil shock occurred during 1978-1979 after the fall of Iran. Panic buying drove up prices and depleted supplies, resulting once again in long lines at gasoline stations. The Carter administration responded by introducing a national program to develop synfuels. Unfortunately, the oil shocks were soon replaced by an oil glut during the 1980s. The return of cheap oil meant that the new initiatives, including the development of synfuels and alternative energy technologies, were largely abandoned because they would not be able to compete against the cheap petroleum-based technologies

The top three oil producing countries are Saudi Arabia, Russia, and the United States. About 80% of

the world's readily accessible reserves are located in the Middle East, with 62.5% coming from the

Arab 5: Saudi Arabia (12.5%), UAE, Iraq, Qatar and Kuwait. However, with high oil prices (above

$100/barrel), Venezuela has larger reserves than Saudi Arabia due to its crude reserves derived

from bitumen.

Distribution of the approximately 1,200B bbls total world oil proved reserves.

Note. The pie charts for each major location show the estimated proved reserve volume in billion bbls, and the proportion for the main countries is shown in the pie segments. Source: BP (2006).

Top 10 largest oil producing companies in the world

Rank Country Production Share of World’s output

(bbl/day) (Percentage)

1 Russia 10,107,000 14.05%

2   Saudi Arabia 9,735,200 13.09%

3 United States 9,373,000 12.23%

4 China 4,189,000 5.15%

5 Canada 3,603,000 4.54%

6 Iraq 3,368,000 4.45%

7 Iran 3,113,000 4.14%

8 United Arab Emirates 2,820,000 3.32%

9 Mexico 2,562,000 3.56%

10 Kuwait 2,619,000 2.96%

CRUDE OIL PRICE

WTI Crude Oil

3.85%$45.922015.09.10 end-of-day▲1.77 

SIGNIFICANCE OF PETROLEUM IN MODERN TIMES

At the beginning of the 20th century the Industrial Revolution had progressed to the extent that the use of refined oil for illuminants ceased to be of primary importance. The oil industry became the major supplier of energy largely because of the advent of the automobile. Although oil constitutes a major petrochemical feedstock, its primary importance is as an energy source on which the world economy depends.The significance of oil as a world energy source is difficult to overdramatize. The growth in energy production during the 20th century is unprecedented, and increasing oil production has been by far the major contributor to that growth. Everyday an immense and intricate system moves more than 80 million barrels of oil from producers to consumers. The production and consumption of oil is of vital importance to international relations and has frequently been a decisive factor in the determination of foreign policy. The position of a country in this system depends on its production capacity as related to its consumption. The possession of oil deposits is sometimes the determining factor between a rich and a poor country. For any country, however, the presence or absence of oil has a major economic consequence. On a timescale within the span of prospective human history, the utilization of oil as a major source of energy will be a transitory affair of a century or two. Nonetheless, it will have been an affair of profound importance to world industrialization.

BACKGROUND AND INTRODUCTION

The terms light and heavy in reference to crude can be misleading. Rather than referring to weight, they actually refer to density, with “light” crude being less dense than heavy crude. Light crude has a low viscosity and because it has low wax content, it is a liquid at room temperature. These properties make it easy to pump and extract. Light oil constitutes approximately 30% of the world’s petroleum reserves.Light crude is composed of a high number of paraffins, which are straight and branched chain hydrocarbons that have a high hydrogen to carbon ratio. Essentially, they have two hydrogen atoms for every carbon atom they contain. Because hydrogen weighs roughly 12 times less than carbon, paraffins are lighter and less dense than hydrocarbons with a lower hydrogen to carbon ratio. The best light crudes contain roughly 60% paraffin.Light crude not only has a high number of paraffins, but the paraffins that is does contain tend to be shorter in length. Currently, gasoline is the most valuable product derived from crude oil. The bulk of “typical” gasoline contains paraffins that are 10 carbon atoms in length. That is, the hydrocarbons in gasoline are mostly made up by linking 10 carbon atoms end to end to create a chain. The chain length range in gasoline is 4 to 12 carbons. Because light crude naturally contains a high number of these short chains, it does not have to be refined to a great extent to produce gasoline.Light crude is traded on several exchanges, but none as important as the New York Mercantile Exchange (NYMEX) where light crude is traded as a commodity under the designation “CL.” Prices set on the NYMEX determine the prices that will be paid for a product throughout the world. In general, when the “cost of a barrel of crude” is referenced it is the price of light crude on the NYMEX that is being quoted. Usually that light crude is either West Texas Intermediate or Brent Crude. When trading crude, the minimum price fluctuation is $0.01. However, because the smallest contract size allowed is 1,000 barrels, this equates to a change in price on the exchange of $10.00.Light crude is found through-out the world, but three benchmarks are commonly referenced and tend to set the standard in terms of price. They are West Texas Intermediate (API 39.6), Brent Crude (API 38.06), and Dubai Crude (API 31.0). Ghawar field in Saudi Arabia, the largest oil field in the world

produces light crudes with API values that range from 33 degrees to 40 degrees. Note that an API of 31 is considered light by Arabian standards, but would not be light if produced inside of the United States.

COMPOSITION OF CRUDE OIL

Most people presume petroleum to be similar to gasoline or petrol, simply a less pure form, which needs to be refined. In actuality the chemical composition of petroleum in its raw state can vary extremely.This variation is the reason why petroleum composition differs so much in colour and viscosity between crude oil fields and geographical areas.

TYPICAL COMPOSITION

Although the composition of petroleum will contain many trace elements the key compounds are carbon (93% – 97%), hydrogen (10% - 14%), nitrogen (0.1% - 2%), oxygen (01.% - 1.5%) and sulphur (0.5% - 6%) with a few trace metals making up a very small percentage of the petroleum composition.The percentages for these hydrocarbons can vary greatly, giving the crude oil a quite distinct compound personality depending upon geographic region. These hydrocarbons are typically present in petroleum at the following percentages: paraffins (15% - 60%), napthenes (30% - 60%), aromatics (3% to 30%), with asphaltics making up the remainder.

HEAVY CRUDE OIL

Like light crude, the definition of heavy crude varies by region and by the organization making the determination. In general, if it has an API gravity less than 20, it is considered heavy. At an API gravity of 10, crude oil will have the same density as water. Any API below 10 and the crude sinks in water rather than floating. Oils with an API in this range are often called extra heavy oils. It is estimated that there is twice the amount of heavy crude in reserves than light crude.

PRESENCE OF HEAVY CRUDE OILMost heavy crude is found in Canada and Venezuela, though there are deposits throughout the world. It is generally divided into two categories based on sulfur content. Low sulfur heavy crude has less than 1% sulfur and is primarily found in Africa. High sulfur crude is found throughout the rest of the globe, with Venezuela having the largest single deposit. In fact, the deposit of heavy crude in Venezuela is greater than any recoverable deposit in the world, including Saudi Arabia and Canada.

LIGHT CRUDE OILThe terms light and heavy in reference to crude can be misleading. Rather than referring to weight, they actually refer to density, with “light” crude being less dense than heavy crude. Light crude has a low viscosity and because it has low wax content, it is a liquid at room temperature. These properties make it easy to pump and extract. Light oil constitutes approximately 30% of the world’s petroleum reserves.Light crude is composed of a high number of paraffins, which are straight and branched chain hydrocarbons that have a high hydrogen to carbon ratio. Essentially, they have two hydrogen atoms for every carbon atom they contain. Because hydrogen weighs roughly 12 times less than carbon, paraffins are lighter and less dense than hydrocarbons with a lower hydrogen to carbon ratio. The best light crudes contain roughly 60% paraffin.Light crude not only has a high number of paraffins, but the paraffins that is does contain tend to be shorter in length. Currently, gasoline is the most valuable product derived from crude oil. The bulk of “typical” gasoline contains paraffins that are 10 carbon atoms in length. That is, the hydrocarbons in gasoline are mostly made up by linking 10 carbon atoms end to end to create a chain. The chain length range in gasoline is 4 to 12 carbons. Because light crude naturally contains a high number of these short chains, it does not have to be refined to a great extent to produce gasoline.

PRESENCE OF LIGHT CRUDE OIL

Light crude is found through-out the world, but three benchmarks are commonly referenced and tend to set the standard in terms of price. They are West Texas Intermediate (API 39.6), Brent Crude (API 38.06), and Dubai Crude (API 31.0). Ghawar field in Saudi Arabia, the largest oil field in the world produces light crudes with API values that range from 33 degrees to 40 degrees. Note that an API of 31 is considered light by Arabian standards, but would not be light if produced inside of the United States.

BITUMEN AND OIL SANDS:Bitumen is the preferred geologic term for the sticky, highly viscous semi-solid hydrocarbon present in most natural petroleum. It is alternatively called pitch, resin, and asphaltum.Bitumen is exceptionally difficult to extract, with most processes requiring some level of physical mining as opposed to pump extraction. Bitumen crude is found impregnated in sedimentary rock, much of which is located in Canada. This rock is often referred to as “oil sand” or “tar sand.” The Athabasca oil sands are the largest bitumen deposits in Canada. They are only accessible to surface mining. Venezuela and the United States contain the second and third largest deposits of oil sands respectively. Venezuela’s deposits are less viscous and easier to extract, but their technology is behind that of Canada and the United States, so they actually produce less petroleum from their reserves. If all deposits in Canada are upgraded to crude, it is estimated that the country could supply the rest of the world with oil for roughly 200 years.Bitumen has been used for a number of purposes over the centuries including as mortar between bricks, base material for statues, as waterproofing, and in roadways. In modern uses, it makes up 5% of the products in asphalt cement used in roadways. Roofing accounts for the majority of the remaining bitumen use, though it has niche applications in sound-deadening materials for computers, dishwashers, and cars. With recent increases in crude oil prices, it has become profitable to upgrade bitumen to synthetic crude.

OIL SHALE Oil shale can be a confusing term and the reason is that it can contain crude oil, bitumen, and even natural gas. The easiest way to understand oil shale is to look at its geological origins.Oil shale refers to a type of crude oil that can be refined from sedimentary rock. Sedimentary rock, because it is made by compression, can contain a variety of different things including organic matter. The organic matter in sedimentary rock is referred to as kerogen. Kerogen itself is usually formed from algae and other marine plant life.For sedimentary rock that contains high levels of kerogen, the potential return on investment for removing the hydrocarbon component will become financially feasible when prices of crude oil rise high enough. Removal of kerogen can occur in one of two basic ways. In the first method, open pit and strip mining are used to removed solid material that is then processed above ground to separate the hydrocarbons. In some cases, oil shale is simply burned at electrical generating plants without going through any processing and the rubble is removed when it builds up.

PRESENCE OF OIL SHALE

Because world oil reserves, particularly of light crude, are being depleted and cannot produce petroleum at a rate fast enough to keep up with demand, mining of oil shale is becoming increasingly profitable and common. Large deposits of oil shale exist in Canada, the United States, and Venezuela. Canada is currently the world’s leading producer of petroleum products derived from oil shale.

PETROLEUM FORMATION

Petroleum formation occurs by various hydrocarbons combining with certain minerals such as sulphur under extreme pressure. Modern day scientists have proven that most if not all petroleum fields were created by the remains of small animal and plant life being compressed on the sea bed by billions of tons of silt and sand several million years ago.When small sea plants and animals die they will sink, they will then lie on the sea bed where they will decompose and mix with sand and silt. During the decomposition process tiny bacteria will clean the remains of certain chemicals such as phosphorus, nitrogen and oxygen.

This leaves the remains consisting of mainly carbon and hydrogen. At the bottom of the ocean there is insufficient oxygen for the corpse to decompose entirely. What we are left with is the raw materials for the formation of petroleum.

The partially decomposed remains will form a large, gelatinous mass, which will then slowly become covered by multiple layers of sand, silt and mud. This burying process takes millions of years, with layers piling up one atop another.

THE CLASSIFICATION OF PETROLEUM

The hydrocarbons in crude oil can generally be divided into four categories:

Paraffins: These can make up 15 to 60% of crude and have a carbon to hydrogen ratio of 1:2, which means they contain twice the amount of hydrogen as they do carbon. These are generally straight or branched chains, but never cyclic (circular) compounds. Paraffins are the desired content in crude and what are used to make fuels. The shorter the paraffins are, the lighter the crude is.

 Napthenes: These can make up 30 to 60% of crude and have a carbon to hydrogen ratio of 1:2. These are cyclic compounds and can be thought of as cycloparaffins. They are higher in density than equivalent paraffins and are more viscous.

 Aromatics: These can constitute anywhere from 3 to 30% of crude. They are undesirable because burning them results in soot. They have a much less hydrogen in comparison to carbon than is found in paraffins. They are also more viscous. They are often solid or semi-solid when an equivalent paraffin would be a viscous liquid under the same conditions.

Asphaltics: These average about 6% in most crude. They have a carbon to hydrogen ratio of approximately 1:1, making them very dense. They are generally undesirable in crude, but their 'stickiness' makes them excellent for use in road construction.

API GRAVITYAPI stands for the American Petroleum Institute, which is the major United States trade association for the oil and natural gas industry. The API represents about 400 corporations in the petroleum industry and helps to set standards for production, refinement, and distribution of petroleum products. Specific gravity is a ratio of the density of one substance to the density of a reference substance, usually water. The API gravity is nothing more than the standard specific gravity used by the oil industry, which compares the density of oil to that of water through a calculation designed to ensure consistency in measurement. Less dense oil or “light oil” is preferable to more dense oil as it contains greater quantities of hydrocarbons that can be converted to gasoline.Specific gravity for API calculations is always determined at 60 degrees Fahrenheit.   API gravity is found as follows:API gravity = (141.5/Specific Gravity) – 131.5Though API values do not have units, they are often referred to as degrees. So the API gravity of West Texas Intermediate is said to be 39.6 degrees. API gravity moves inversely to density, which means the denser an oil is, the lower its API gravity will be. An API of 10 is equivalent to water, which means any oil with an API above 10 will float on water while any with an API below 10 will sink.The API gravity is used to classify oils as light, medium, heavy, or extra heavy. As the “weight” of an oil is the largest determinant of its market value, API gravity is exceptionally important. The API values for each “weight” are as follows:

Light – API > 31.1

Medium – API  between 22.3 and 31.1 Heavy – API < 22.3 Extra Heavy – API < 10.0

 These are only rough valuations as the exact demarcation in API gravity between light and heavy oil changes depending on the region from which oil came. The fluctuation as to what constitutes light crude in a given region is the result of commodity trading in oil.Because density is a measure of weight per volume, API can be used to calculate how many barrels of crude can be extracted from a metric ton of a given oil. A metric ton of West Texas Intermediate, with an API of 39.6, will produce 7.6 barrels (at 42 gallons each). The calculation is:Barrels per metric ton = 1/[(141.5/(API + 131.5) x 0.159]

BENCHMARK OILS

Benchmark oils are used as references when pricing oils. There are approximately 161 different benchmark oils, of which the main three West Texas Intermediate, Brent Crude, and Dubai Crude. Crude oil is the most actively traded commodity and is bought and sold in “contracts.” A contract trades in units of 1,000 barrels of oil and benchmarks help to determine the price of a barrel of oil in a contract.WEST TEXAS INTERMEDIATE

WTI is probably the most famous of the bench mark oils. It is a light, sweet crude with an API gravity of 39.6 degrees. That gives it a specific gravity of 0.827, which means that at 60 degrees Fahrenheit, WTI is only 8/10 as heavy as water. It contains 0.24% sulfur and is refined in the Midwest. It comes from the Southwestern United StatesBRENT CRUDE

Brent Crude, named after a goose, comes from the North Sea. It is a light, sweet crude with an API gravity of 38.06 and a specific gravity of 0.835, making it slightly “heavier” than West Texas Intermediate. The sulfur content is 0.37%. The price of Brent Crude is used to set prices for roughly 2/3 of the world’s oil. It is mostly refined in Northwest Europe and is also called Brent Blend, London Brent, and Brent petroleum. The Brent field is located in the East Shetland Basin, halfway between Scotland and Norway.

DUBAI CRUDE

Dubai Crude is light and sour, with an API gravity of 31 degrees and a specific gravity of 0.871. Its sulfur content is 2%, making it 6 times more sour than Brent Crude and 8 times more sour than West Texas Intermediate. It is generally used for pricing oil that comes from the Persian Gulf. Dubai Crude is also known as Fateh. Its importance comes not only from its quality, but also from the fact that it was the only freely traded oil from the Middle East until recently.OPEC REFERENCE BASKET (ORB)This is not a specific crude, but rather is a weighted average of petroleum that comes from OPEC countries. There are currently 11 different oils combined into the ORB. It averages an API gravity, with the present combination, of 32.7 degrees and has a sulfur content of 1.77%. It was recently changed to reflect the average quality of crude oil in OPEC Member Countries. The change decreased the API and increased the sulfur content of the basket.MINAS

Minas oil is also referred to as Sumatran Light and comes from the island of Sumatra. It is a light, sweet crude. The API gravity is approximately 35 and the specific gravity is 0.8498. It has a sulfur content of only 0.08%. It is produced at a rate of approximately 420,000 barrels per day.TAPIS

Tapis is often referred to as the “World’s Costliest Oil” and comes from a single field in Malaysia. Its value comes from the fact that WTI and Brent Crude are difficult and expensive to export to Asia and

because it is of extremely high quality. Tapis has an API gravity of 45.2 degrees and a sulfur content of 0.0343%. These are exceptional numbers, indicating that Tapis is very light and very sweet. Unfortunately, output from the Tapis field has been falling steadily since 1998.

BONNY LIGHT

Bonny light comes from Nigeria and is a light, sweet oil. It has an API gravity of 32.9 and a sulfur content of 0.16%

ISTHMUS-34 LIGHT

This is a sour crude with and API gravity of 33.74 degrees and a sulfur content of 1.45%. It is produced in Mexico. Though Mexico is not a part of OPEC, this oil was once part of the OPEC Reference Basket. It was removed in from the ORB when it was changed in 2005.SWEET

The terms sweet and sour are a reference to the sulfur content of crude oil. Early prospectors would taste oil to determine its quality, with low sulfur oil actually tasting sweet. Crude is currently considered sweet if it contains less than 0.5% sulfur.Sweet crude is easier to refine and safer to extract and transport than sour crude. Because sulfur is corrosive, light crude also causes less damage to refineries and thus results in lower maintenance costs over time. Due to all these factors, sweet crude commands up to a $15 dollar premium per barrel over sour.

PRESENCE OF SWEET CRUDE OIL

Major locations where sweet crude is found include the Appalachian Basin in Eastern North America, Western Texas, the Bakken Formation of North Dakota and Saskatchewan, the North Sea of Europe, North Africa, Australia, and the Far East including Indonesia.SOUR

Sour crude oil will have greater than 0.5% sulfur and some of this will be in the form of hydrogen sulfide. Sour crude also contains more carbon dioxide. Most sulfur in crude is actually bonded to carbon atoms, nevertheless, high quantities of hydrogen sulfide in sour crude can pose serious health problems or even be fatal.PRESENCE OF SOUR CRUDE OIL

Sour crude is more common in the Gulf of Mexico, Mexico, South America, and Canada. Crude produced by OPEC Member Nations also tends to be relatively sour, with an average sulfur content of 1.77%.FUEL FROM CRUDE

The primary uses of crude oil to this point have been in the production of fuel. A single barrel of crude oil can produces the following components, which are listed by percent of the barrel they constitute.

42% Gasoline 22% Diesel 9% Jet Fuel 5% Fuel Oil 4% Liquefied Petroleum Gases 18% Other products

RefiningPetroleum refining refers to the process of converting crude oil into useful products. Crude oil is composed of hundreds of different hydrocarbon molecules, which are separated through the process of refining.  The process is divided into three basic steps: separation, conversion, and treatment.

1. SeparationSeparation refers to the process of distillation. Crude oil is heated in a furnace so that hydrocarbons can be separated via their boiling point.

2. ConversionConversion is simply the process of changing on kind of hydrocarbon into another. Of the, the desired product is gasoline. 

3. TreatmentTreatment is the final process of refining, and includes combining processed products to create various octane levels, vapor pressure properties, and special properties for products used in extreme environments. GasolineGasoline is the most popular product derived from petroleum and constitutes the largest fraction of product obtained per barrel of crude oil. DieselDiesel fuel consists of hydrocarbons of a chain length between eight and 21 carbon atoms.  Diesel has higher energy content per volume than gasoline.  Because they hydrocarbons in diesel are larger, it is less volatile and therefore less prone to explosion, which is one reason it is preferred in military vehicles.Heating Oil and Fuel OilFuel oil is one of the “left-over” products of crude refining. It is often less pure than other refined products, containing a broader range of hydrocarbons. Because of its contaminants, fuel oil has a high flash point and is more prone to autoignition. It also produces more pollutants when burned.Jet FuelJet fuel requires specific characteristics. Namely, it must have a low flammability and it must be able to experience the cold temperatures associated with high altitude without freezing. Jet AUsed only in the United States. Flash point of 38 C (100 F) and autoiginition temperature of 210 C (410 F). This makes jet fuel safer than traditional gasoline.Jet A-1Jet A-1 is similar to Jet A, but with a lower freezing point of 47 C.Jet BJet B is designed for use in cold climates. It has a lower autoignition temperature, which makes it more dangerous than Jet A fuels.

GLOBAL PERSPECTIVE OF MAJOR OIL PRODUCERS

RUSSIA   International energy data and analysis

Russia is the world's largest producer of crude oil (including lease condensate) and the second-largest producer of dry natural gas. Russia also produces significant amounts of coal. Russia's economy is highly dependent on its hydrocarbons, and oil and natural gas revenues account for more than 50% of the federal budget revenues.Russia consumed 31.52 quadrillion British thermal units (Btu) of energy in 2012, the majority of which was in the form of natural gas (51%). Petroleum and coal accounted for 22% and 18%, respectively

http://www.eia.gov/beta/international/analysis.cfm?iso=RUS

PRODUCTION VOLUME:Russia was the world's largest producer of crude oil including lease condensate and the third-largest producer of petroleum and other liquids (after Saudi Arabia and the United States) in 2014, with average liquids production of 10.9 million barrels per day (b/d). Russia was the second-largest producer of dry natural gas in 2013 (second to the United States), producing 22.1 trillion cubic feet (Tcf).

Saudi Arabia is the world’s largest producer and exporter of oil, and has one quarter of the world’s known oil reserves – more than 260 billion barrels. Most are located in the Eastern Province, including the largest onshore field in Ghawar and the largest offshore field at Safaniya in the Arabian Gulf.

BRIEF GEO-ECONOMICS OF OIL & ITS IMPACT ON MIDDLE EAST OIL MARKET

OPEC’S LONG-TERM VIEW:To be sure, $60 oil hurts OPEC member states. Venezuela would like to see prices shoot beyond the $100 per barrel mark again and lift state budgets out of the red, as would Kuwait and Iran. But looking at the short-term fiscal interests of OPEC members misses the point. OPEC has a long-term view, and it has learned from history—more precisely from the aftermath of the oil price surge of the 1970s.Embargoes and high prices in the early 1970s brought new producers to the stage, notably Mexico, Norway, the United Kingdom, the U.S. state of Alaska, and the Soviet Union, rapidly expanding global supply by the end of the decade. In response, OPEC started cutting production, which led to a significant loss of market share but did little to stabilize prices, as non-OPEC producers kept on pumping even more. It was Saudi Arabia, the swing producer, that absorbed these losses, while most fellow OPEC countries were free riders.Saudi Arabia’s oil output contracted to 2.4 million barrels per day (mbd) in August 1985, down from more than 10 mbd in 1980. In 1986, when the kingdom eventually opened the floodgates and ramped up production to 5 mbd, prices immediately collapsed, falling 50 percent from 1985 to 1986.This undoubtedly hurt OPEC economies. In Saudi Arabia, which had cut production from 1982 onward, the state budget was already in deficit when the price collapsed.The United States is the world's largest national economy, representing 22% of nominal global GDP and 17% of global GDP (PPP). The United States' GDP was estimated to be $18.124 trillion as of Q2 2015. The U.S. dollar is the currency most used in international transactions and is the world's foremost reserve currency. Several countries use it as their official currency, and in many others it is the de facto currency. The United States has a mixed economy and has maintained a stable overall GDP growth rate, a moderate unemployment rate, and high levels of research and capital investment. Its seven largest trading partners are Canada, China, Mexico, Japan, Germany, South Korea, and the United Kingdom.

THE ECONOMICS OF U.S CRUDE OIL STORAGE CAPACITY

By Gary AshtonU.S. CRUDE OIL IN STORAGE REACHES RECORD LEVELS

U.S. crude oil production and storage continues at a healthy pace despite the rapid decline in the Baker Hughes (BHI) onshore drilling rig count. Data from the Energy Information Administration (EIA) shows that for the week ending March 27, crude oil stocks reached a record 471.4 million barrels, up 91.4 million barrels compared to a year ago, continuing a trend that began accelerating in January 2015.

Source: US EIA

UNITED STATES PRODUCES THE WRONG KIND OF CRUDE:Part of the problem seems to be that the U.S. produces too much of the light, sweet crude oil that many local refiners simply can’t use and don’t need because they are designed to refine heavy, sour crude. For example, according to the Congressional Research Service (CRS) and the EIA, 68% of total U.S. refining capacity is located on the West and Gulf Coast(or Petroleum Administration for Defense Districts – PADD 3 and 5) and more than half of the refineries in those districts handle heavy, sour crude. The chart below shows how the heavy, sour quality of crude processed by these two districts (PADD 3 and 5) compares to the type of crude used by other districts and the U.S. average.

CHINA   International energy data and analysis

China is the world's most populous country with a fast-growing economy that has led it to be the largest energy consumer and producer in the world. Rapidly increasing energy demand, especially for petroleum and other liquids, has made China influential in world energy markets.China has quickly risen to the top ranks in global energy demand over the past few years. China became the largest global energy consumer in 2011 and is the world's second-largest oil consumer behind the United States. The country was a net oil exporter until the early 1990s and became the world's second-largest net importer of crude oil and petroleum products in 2009. The U.S. Energy Information Administration (EIA) reports that China surpassed the United States at the end of 2013 as the world's largest net importer of petroleum and other liquids, in part because of China's rising oil consumption. China's oil consumption growth accounted for about 43% of the world's oil consumption growth in 2014. Despite China's slower oil consumption growth in the past few years, EIA projects China will account for more than one-fourth of the global oil consumption growth in 2015.

CANADA’S ECONOMY

Beyond petroleumGrowth is shifting from the oil-producing west back to the traditional economic heartland. Political power could shift with itJan 31st 2015 | TORONTO | 

THE oil industry isn’t remotely the entire Canadian economy,” declared the prime minister, Stephen Harper, on January 22nd. That is not a startling statement. Production of crude oil represents just 3% of Canada’s GDP. The surprise is that Mr Harper felt he has to state the obvious. In an economy dominated by services, Mr Harper and his Conservative Party have cast themselves as champions of the oil industry, which is centered in Alberta, his adopted home province.