A mineral oil consisting of a mixture of
hydrocarbons of natural origin, yellow to black in color, of variable
specific gravity and viscosity; often referred to simply as crude.
OR
A fossil fuel formed from plant and animal remains many million of
years ago. It comprises organic compounds built up from hydrogen and
carbon atoms and is, accordingly, often referred to as hydrocarbons.
Crude oil is occasionally found in springs or pools but is usually
drilled from wells beneath the earth's surface.
VARIETIES OF CRUDE OIL
The petroleum industry often characterizes crude oils according to
their geographical source, e.g., Alaska North Slope Crude. Oils from
different geographical areas have unique properties; they can vary in
consistency from a light volatile fluid to a semi-solid.
The classification scheme provided below is more useful in a response
scenario.
- Class A: Light, Volatile Oils - These oils are highly fluid,
often clear, spread rapidly on solid or water surfaces, have a
strong odor, a high evaporation rate, and are usually flammable.
They penetrate porous surfaces such as dirt and sand, and may be
persistent in such a matrix. They do not tend to adhere to surfaces;
flushing with water generally removes them. Class A oils may be
highly toxic to humans, fish, and other biota. Most refined products
and many of the highest quality light crudes can be included in this
class.
- Class B: Non-Sticky Oils - These oils have a waxy or oily feel.
Class B oils are less toxic and adhere more firmly to surfaces than
Class A oils, although they can be removed from surfaces by vigorous
flushing. As temperatures rise, their tendency to penetrate porous
substrates increases and they can be persistent. Evaporation of
volatiles may lead to a Class C or D residue. Medium to heavy
paraffin-based oils fall into this class.
- Class C: Heavy, Sticky Oils - Class C oils are
characteristically viscous, sticky or tarry, and brown or black.
Flushing with water will not readily remove this material from
surfaces, but the oil does not readily penetrate porous surfaces.
The density of Class C oils may be near that of water and they often
sink. Weathering or evaporation of volatiles may produce solid or
tarry Class D oil. Toxicity is low, but wildlife can be smothered or
drowned when contaminated. This class includes residual fuel oils
and medium to heavy crudes.
- Class D: Nonfluid Oils - Class D oils are relatively non-toxic,
do not penetrate porous substrates, and are usually black or dark
brown in color. When heated, Class D oils may melt and coat surfaces
making cleanup very difficult. Residual oils, heavy crude oils, some
high paraffin oils, and some weathered oils fall into this class.
These classifications are dynamic for spilled oils; weather
conditions and water temperature greatly influence the behavior of oil
and refined petroleum products in the environment. For example, as
volatiles evaporate from a Class B oil, it may become a Class C oil. If
a significant temperature drop occurs (e.g., at night), a Class C oil
may solidify and resemble a Class D oil. Upon warming, the Class D oil
may revert back to a Class C oil.
Categories of Crude Oil
- West Texas Intermediate (WTI) crude oil is of very high quality.
Its API gravity is 39.6 degrees (making it a "light" crude
oil), and it contains only about 0.24 percent of sulfur (making a "sweet"
crude oil). WTI is generally priced at about a $2-4 per-barrel
premium to OPEC Basket price and about $1-2 per barrel premium to
Brent, although on a daily basis the pricing relationships between
these can very greatly.
- Brent Crude Oil stands as a benchmark for Europe.
- India is very much reliant on oil from the Middle East (High
Sulphur). The OPEC has identified China & India as their main
buyers of oil in Asia for several years to come.
India in World Crude Oil Industry
Petroleum and Natural Gas: The recent exploration and production
activities in the country have led to a dramatic increase in the output
of oil. The country currently produces 35 million tonnes of crude oil,
two-thirds of which is from offshore areas, and imports another 27
million tonnes. Refinery production in terms of crude throughput of the
existing refineries is about 54 million tonnes.
Natural gas production has also increased substantially in recent
years, with the country producing over 22,000 million cubic metres.
Natural gas is rapidly becoming an important source of energy and
feedstock for major industries. By the end of the Eighth Five-Year Plan,
production was likely to reach 30 billion cubic metres.
Factors Influencing Crude Oil Markets
- Shortage of oil supplies
- Taxation - When oil taxes are raised, end consumers often
mistakenly blame the oil producers, but it is really their own
governments that are responsible.
- Balance of demand and supply in the short term
- Rate of investment in the longer term
- Accidents
- Bad weather
- Increasing demand
- Halting transport of oil from producers
- Labour disputes
Note : If traders in the oil
market believe there will be a shortage of oil supplies, they may raise
prices before a shortage occurs.
Causes of low Oil Prices
- Imbalance between supply and demand.
- If oil production rises faster than demand.
- If the oil industry is unprofitable and discourages
investors.
Causes of high oil prices
- Shortage of oil supplies
- Balance of demand and supply in the short term
- Rate of investment in the longer term
- If traders in the oil market believe there will be a shortage of
oil supplies, they may raise prices before a shortage occurs
- War
- Natural disasters
Crude oil reserves
World crude oil reserves are estimated at more than one trillion
barrels, of which the 11 OPEC Member Countries hold more than 75 per
cent. OPEC's Members currently produce around 27 million to 28 million
barrels per day of oil, or some 40 per cent of the world total output,
which stands at about 75 million barrels per day.
Is the world running out of oil?
Oil is a limited resource, so it may eventually run out, although not
for many years to come. OPEC's oil reserves are sufficient to last
another 80 years at the current rate of production, while non-OPEC oil
producers' reserves might last less than 20 years. The worldwide demand
for oil is rising and OPEC is expected to be an increasingly important
source of that oil.
If we manage our resources well, use the oil efficiently and develop
new fields, then our oil reserves should last for many more generations
to come.
Uses of Crude Oil
- Gasoline
- petrol
- liquefied petroleum gas (LPG)
- naphtha
- kerosene
- gasoil
- fuel oil
- lubricants
- asphalt (used in paving roads)
- naphtha
- gasoil
- ethane
- ethylene
- propylene
- butadiene
- benzene
- ammonia
- methanol
- plastics
- synthetic fibres
- synthetic rubbers
- detergents
- chemical fertilisers.
Exchanges dealing in Crude Futures apart from MCX
- The New York Mercantile Exchange (NYMEX)
- The International Petroleum Exchange of London (IPE)
- The Tokyo Commodity Exchange (TOCOM)
Crude Oil Units (average gravity)
- 1 US barrel = 42 US gallons
- 1 US barrel = 158.98 litres
- 1 tonne = 7.33 barrels
- 1 short ton = 6.65 barrels
- Note: barrels per tonne vary from origin to origin
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