Crude oil 

is a naturally occurring, unrefined petroleum product composed of hydrocarbon

deposits and other organic materials. A type of fossil fuel, crude oil can be refined to
produce usable products such as gasoline, diesel, and various other forms of
petrochemicals.

Crude oil, commonly known as petroleum, is a liquid found within the Earth comprised
of hydrocarbons, organic compounds and small amounts of metal. While hydrocarbons
are usually the primary component of crude oil, their composition can vary from 50%-
97% depending on the type of crude oil and how it is extracted. Organic compounds like
nitrogen, oxygen, and sulfur typically make-up between 6%-10% of crude oil while
metals such as copper, nickel, vanadium and iron account for less than 1% of the total
composition.

Crude oil is a liquid fuel source located underground. It is extracted through

drilling. Oil is used for transportation, petroleum products, and plastics.

Brent, West Texas Intermediate, and Dubai/Oman are the most important
benchmarks of crude oil

Fossil fuel, any of a class of hydrocarbon-containing materials of

biological origin occurring within Earth’s crust that can be used as a
source of energy.
Fossil fuels include coal, petroleum, natural gas, oil
shales, bitumens, tar sands, and heavy oils.

Crude oil is a mixture of comparatively volatile

liquid hydrocarbons (compounds composed mainly
of hydrogen and carbon), though it also contains
some nitrogen, sulfur, and oxygen.

Regardless of variations, however, almost all crude oil ranges from

82 to 87 percent carbon by weight and 12 to 15 percent hydrogen by
weight.
 Oil is produced (extracted) using different methods depending on geology and location.
After recovering the oil, it is sent to refineries to create refined products we use every
day, such as gasoline.0+

Uses

Crude oil is the base for lots of products. These include transportation fuels
such as gasoline, diesel, and jet fuel. used for heating and electricity
generation

The oil and gas industry can be segregated into three sections –

1. The upstream industry

2. The downstream industry
3. The midstream industry

The upstream companies are the ones that do the dirty work – they take on geological
surveys, dig up bore wells to get a sense of what’s in the ground underneath, and if they find
oil reserves, they then begin the drilling and extraction of crude oil. It takes many years for
upstream companies to identify an asset (potential oil well) and convert it into a

functional, profitable oil well. Upstream companies manufacture and store crude oil in barrels
(millions of barrels are produced everyday). These companies do R&D and engineering, and
are asset heavy. Therefore, they end up spending a lot of money (read as capital
expenditure) to extract oil.

Companies such as ONGC, Carin India, Reliance Industries, Oil India are some of the Indian
upstream companies. Internationally companies such as Shell, BP.

We will talk about the downstream industry first, and then discuss the mid stream industry.
Generally speaking, the job of the upstream companies ends at producing crude oil. ‘Crude
oil’ as you realize is produced in its raw form. If we have to use it as petrol or diesel, then the
crude oil has to be refined. This is where the downstream industry comes into the picture.
 These companies purchase the crude oil from upstream companies and refine the crude oil
to various forms such as – petrol, diesel, aviation fuel, marine oil, kerosene, lubricants,
waxes, asphalts, liquefied petroleum gas etc.,.

Good examples of downstream companies in the Indian context are – BPCL, HPCL, IOC
etc.

o Low oil prices is bad for the upstream boys but good for the downstream
fellows
o Higher oil price is good for upstream fellows but bad for downstream boys.
4j