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What Is Petroleum?

There are several ways to answer the question, “What is petroleum?”


1.      Semantics: According to Oxford Dictionaries Online [1], the English word “petroleum” is a compound of two Latin words:   petra (rock) + oleum (oil). In Greek, the source words are π´ετρα (pe´tra) and λαιoν (elaion). In Chinese, the characters for petroleum are 石油, pronounced shiyo´u which  also means “stone (rock) oil.” Natural liquid petroleum also is called crude oil, crude, black gold, Texas Tea, etc. Bitumen is a solid or semisolid form of petroleum. Colloquially, bitumen and tar are synonyms. People generate synthetic petroleum from coal, kerogen, or bitumen. Biocrude comes from plants or municipal wastes.

2.     Geology: Petroleum is a fossil hydrocarbon associated with certain geological formations. It is coproduced with natural gas and often is discussed in that context, as in “the oil and gas” business. Bitumen is found on the sur- face in tar pits, stuck to sand or grit in oil sands, or in underground deposits. Kerogen is the organic component of oil shale.

3.     Appearance: Some crude oil is as clear as vegetable oil. Other crudes are green, brown, or black. Some flow like water, while others don’t flow at all unless they are heated. Bitumen and tar are black and gooey.

4.     Chemical composition: Petroleum is a complex mixture of countless organic molecules derived from ancient microorganisms. Most of the molecules are hydrocarbons. Some contain sulfur, nitrogen, oxygen, or trace elements. Raw crude oil also contains inorganic matter, such as water, salt, inorganic sulfur, and dirt.

5.     Economics: Petroleum is an important source of energy. Figure 1 shows that in 2013, oil accounted for 33% of world energy consumption. Natural gas accounted for 23.7% and coal provided 30.1%. In addition to serving as a primary source of liquid fuels, petroleum is a raw material from which we produce lubricants, petrochemicals, construction materials, and thousands of consumer products. Figures 2 and 3 illustrate how energy consumption has changed since 1820. The Industrial Revolution stimulated coal demand. Large-scale petroleum production began in the late 1850s, and by 1970, oil had overtaken coal as the world’s leading source of energy. As shown in Fig. 3, there has been a sharp upward spike in coal consumption since the turn of the twenty-first century, due to rapid economic growth in India and China.


Fig. 1 World energy consumption by fuel. Based on data from the BP Statistical Review of World Energy 2015 [2]

Fig. 1 World energy consumption by fuel. Based on data from the BP Statistical Review of World Energy 2015 [2]



Petroleum Products

 Today, transportation comprises most of the world demand for petroleum, which meets 90% of world demand for transportation fuel. Most naphtha ends up as gasoline, most gas oil (aka distillate fuel oil) ends up in diesel fuel, and jet engines have replaced lanterns as the main destination for kerosene. Table 1 gives a detailed breakdown of average US refinery yields in 2014. Most distillate fuel oil becomes diesel fuel. Breakdowns are different in Europe and Asia, where gasoline consumption is relatively lower and diesel consumption is relatively higher.


In addition, petroleum refineries provide precursors for petrochemicals, some of which are listed in Table 2. Also listed are secondary chemicals—those “used to make . . .”—which in turn are transformed into tens of thousands of consumer goods. It is difficult these days to find a product which has been manufactured without a petroleum derivative, especially when one includes the fuel consumed when transporting products to market.

Fig. 2 World energy consumption by source since 1820 [3]. Drawing created by Gail Tverberg of Our Finite World and used with her kind permission

Fig. 2 World energy consumption by source since 1820 [3]. Drawing created by Gail Tverberg of Our Finite World and used with her kind permission


Fig. 3 Selected world events and crude oil prices in 1859–2015. Prices are annual averages. Items in purple boxes indicate the start dates for major new production. The underlying format comes from the BP Statistical

Fig. 3 Selected world events and crude oil prices in 1859–2015. Prices are annual averages. Items in purple boxes indicate the start dates for major new production. The underlying format comes from the BP Statistical


Table 1 Industry-average volume-percent yields from petroleum refineries in the United States [7]

Table 1 Industry-average volume-percent yields from petroleum refineries in the United States [7]


Table 2 Major petrochemicals and uses

Table 2 Major petrochemicals and uses



People and Petroleum: A History

Ancient Times

Spears and Baskets. According to archaeologists, people were hafting spears with bitumen more than 70,000 years ago near Umm el Tlel, in present day Syria  [8].  A  paper  by  Carciumaru et al. indicates that Neanderthals in Romania may have hafted spears with bitumen between 28,000 and 33,000 BC [9, 10].


Jane McIntosh’s superb book [11] about the ancient Indus valley shows that baskets were Review of World Energy [2]. Many events are described in Daniel Yergin’s book, The Prize [4]. Selected events and recent prices come from the US Energy Information Administration [5, 6] waterproofed with bitumen before 5500 BC in Mehrgarh, an ancient site located in present-day Pakistan between the cities of Quetta, Kalat, and Sibi.


Towers, Boats, and Mummies. Bitumen is mentioned in some of the earliest records [12, 13], specifically those written on tablets in about 3200 BC and discovered in the ancient city of Sumer. Bitumen use is also mentioned in Egyptian pictographs that were written at roughly the same time. Sumerian writings describe the use of bitumen for mortar, to cement eyes into carvings, for building roads, for caulking ships, and in other waterproofing applications.


The asphalt came from nearby oil pits, and great quantities of it were found on the banks of the river Issus, one of the tributaries of the Euphrates. The Greek historian Herodotus mentioned the use of bitumen in Babylon (1900–1600 BC), including its use for constructing the famous Tower. At about the same time (3200 BC), Egyptian writings describe using pitch to grease chariot wheels and using asphalt in mummification. Egypt’s primary source of bitumen was the Dead Sea, which the Romans called Palus Asphaltites (Asphalt Lake).


Ancient Persian tablets describe using bitumen and its fractions for lighting, topical ointments, and flaming projectiles. By 500 BC, the ancients knew that light fractions, such as naphtha, could be used as a supplement to asphalt, making the latter easier to handle. The light fractions may have been collected with simple batch distillation equipment such as that described by Zosimos of Panopolis, a Greek alchemist who lived at the end of the third and beginning of the fourth century AD [14].


Invisible Spirits. According to Mark Kurlansky’s book on the history of salt [15], a Qin Dynasty official named Li Bing ordered the drilling of the first known brine wells in 252 BC, after discovering that salt pools in Sichuan were fed from underground. Occasionally, the well diggers became weak or sick, and sometimes explosions killed an entire crew. Workers and their communities concluded that their troubles were caused by evil spirits.


By 100 AD, workers understood that the invisible spirits were in fact flammable gas; we call it natural gas. They piped it into open sheds through bamboo tubes, which they leak-proofed with mud and brine. In the open “boiling houses,” they cooked water off the brine, leaving behind crystallized salt. By the end of the second century AD, coproduction of gas and brine was being controlled by a system of leather valves, which resembled in many respects modern cricket wells.


By 347 AD, the Chinese were drilling for gas itself with bamboo shafts. They collected bitumen, too, and employed it in unique ways. For example, they warmed it to drive off lighter fractions, leaving behind a thermoplastic material with which scabbards and other items were covered. Statuettes of household deities were cast with this material in Japan, and perhaps also in China.


Greek Fire. Greek fire [16] was invented during the reign of Byzantine Emperor Constantine IV (668–685) by Callinicus of Heliopolis, a Jewish refugee from Syria. This formidable weapon was sprayed at enemy ships from siphons. It burst into flame on contact with air and could not be extinguished with water.

Greek ships used the weapon to cripple an attacking Arab fleet during the 4-year siege of Constantinople (674–678). The exact composition of Greek fire is still a matter of speculation and debate. Most believe that it was comprised of naphtha, liquid petroleum, bitumen, and quicklime.


Early Kerosene. In over 200 books and articles, the great Persian scholar, Muhammad al-Razi (865–925 AD), made fundamental contributions to many areas, including medicine, alchemy, music, and philosophy. He discovered numerous chemicals and compounds, including kerosene, which he recovered from petroleum [17]. Kerosene has been used for heating ever since.


Lamps and Whales. Lamps have been providing people with artificial   illumination   since 15,000 BC and maybe even before [18]. Lamps found in the Lascaux caves near Dordogne, France, were carved from stone; the Lascaux archaeological site is best known for its Paleo- lithic cave-wall paintings [14]. Ancient lamps found elsewhere were made from hollow stones, seashells, coconuts, and even egg shells [19]. For the most part, fuel for early lamps came from animal fats. This “lard oil” was readily available, but it burned with a smoky, smelly flame. Sea-faring civilizations found that the cleanest burning lamp fuel was whale oil.



After the Eighteenth Century

Yankee Whaling. The American whaling industry started in the eighteenth century in New York and New England. Early hunters concentrated on right whales and humpbacks, which were found near the American coast. As these declined and the market for whale oil grew, whalers spanned the globe, hunting especially for the sperm whale. This creature supplied high-quality spermaceti, a dense wax that burns with a clear, bright flame.


After the 1783 Treaty of Paris, which ended the American Revolution, Yankee whaling flourished. By the 1830s, it was globally preeminent. Whale oil was illuminating homes and businesses throughout the world. It also served as a preferred lubricant for the machinery of the Industrial Revolution. Baleen from whales provided buggy whips, fishing poles, corset stays, and dress hoops [17]. Prices fluctuated wildly, due to world events and changes in sup- ply/demand, but they peaked in the 1850s. Whale oil sold for an average price of US$1.77 per gallon between 1845 and 1855. In contrast, lard oil sold for about US$0.90 per gallon.


Modern Kerosene. In 1860, due to overhunting, several whale species were almost extinct [21]. Just in time, they were saved by kerosene, a cleaner burning and relatively abundant alterna- tive. As mentioned above, Muhammad al-Razi wrote about recovering kerosene from petroleum before 925 AD.


More than 900 years later, the following occurred:


1.      In 1846, Canadian geologist Abraham Gesner developed distillation processes to recover kerosene from coal, bitumen, and oil shale. In 1850, his company began installing lighting in Halifax, Nova Scotia, Canada [22]. In 1847, James Oakes built a rock oil refinery in Jacksdale, England, to recover paraffin oil for lamps [23]. (Kerosene was not “invented,” as some sources say. Al-Razi, Gesner, and Oakes separated the substance from mixtures, just as Joseph Priestly and Carl Scheele separated oxygen from air.)

2.     In 1848, the “first modern oil well" was in Asia, on the Apsheron Peninsula northeast of Baku, by Russian engineer F.N. Semyenov [24]. Eleven years later, a refinery was constructed near the well to convert raw petroleum into several products.

3.     Major advances came in the 1850s, when Ignacy Lukasiewicz of Poland and Robert Dietz in America independently developed practical kerosene lamps [25]. The Lukasiewicz lamp was being used in 1853 to illuminate train stations throughout Austria. The robust Dietz flat-wick lamp, for which a patent was issued in 1859, produced a clean, bright steady flame. It was the first of several widely used devices manufactured by the R.E. Dietz Company.

4.     In July or August 1858, James Miller Williams struck oil while drilling a well for brine in Oil Springs, Ontario, Canada, near present-day Petrolia [26].


Subsequent events are indicated in Fig. 3, which also shows oil prices versus time since 1859, both in money of the day and inflation- corrected dollars.


Pennsylvania Oil Rush. The availability of kerosene got a sudden boost on August 27, 1859, when Edwin L. Drake drilled an oil well near Titusville, Pennsylvania. By today’s standards, the well was shallow—about 69 feet   deep (21 m deep)—and it produced only 35 barrels per day. Drake was able to sell the oil for US$20 per barrel, a little less than the price of lard oil and 70% less than the price of whale oil. Drake’s oil well was not the first ever, but it was the first on record drilled through rock with a powered rotary engine. More significantly, it triggered the Pennsylvania oil rush.


Owners of adjacent leases recognized that they and their neighbors were accessing the same large pool, so the key to profit was to drill as many wells as possible as soon as possible. The result is illustrated by Fig. 4, which shows some of the closely spaced wells that sprang up in 1859 in the Pioneer Run oil field a few miles from Titusville.


Prices were highest in 1859–1860, because whale oil prices were so high then. People were eager to pay a bit less for distilled kerosene, which was a superior product. But due to a lack of transportation infrastructure to move oil from the fields to refineries and from refineries to markets on the U.S. east coast, consumption didn’t keep pace with supply, and soon, due to rampant overproduction, prices plummeted. From $10 per barrel in January 1861, prices fell to as low as $0.10 at the end of that year. But demand caught up, and by September 1863, they reached $7.25 per barrel [4].


Standard Oil Company. John D. Rockefeller brought order to the industry by monopolizing it. He took his first major step in 1865, when he acquired full ownership of a major refinery in Cleveland, Ohio [24]. By 1870 Rockefeller con- trolled several refineries in Cleveland and had negotiated rock-bottom rates for transporting kerosene to the US East Coast by rail. In that year, he led the formation of the Standard Oil Company, which, at its peak, controlled 85–90% of the US oil industry and held significant interests in much of the rest of the world.


Fig. 4 Pioneer Run oil field in 1859. Photo used with permission from the Pennsylvania Historical Collection and Museum Commission, Drake Well Museum Collection, Titusville, PA

Fig. 4 Pioneer Run oil field in 1859. Photo used with permission from the Pennsylvania Historical Collection and Museum Commission, Drake Well Museum Collection, Titusville, PA


In 1911, due to a ruling by the US Supreme Court, Standard Oil was split into 34 smaller companies. Among these were Standard of New York (Mobil), Standard of New Jersey (Exxon), Standard of Ohio (Sohio), Standard of California (Socal), Continental Oil (Conoco), and The Ohio Oil Company (Marathon). Both Continental and “The Ohio” had been indepen- dent before being acquired by Standard. In the late 1990s, BP acquired Sohio and Arco (for- merly Atlantic Richfield). In 1999, Exxon and Mobil merged into ExxonMobil. Socal is now Chevron, which grew through a series of mergers and acquisitions—notably of Gulf (1985), Texaco (2001), and Unocal (2005).


US Independents. US oil companies that maintained independence during the reign of Standard Oil include Union Oil (Unocal), which was founded in California in 1890, and Pure, which was founded in 1895. A notable Pure accomplishment was to circumvent Standard’s railroad monopoly by building a pipeline from the Oil Regions to the US East Coast. Standard quickly caught on and built or acquired its own pipelines. In 1901, Gulf and Texaco were spawned by the East Texas oil boom. US companies founded after the Standard Oil breakup include Sinclair (1916), Phillips (1917), and Occidental (1920).


Royal Dutch Shell, BP, and Total. The Royal Dutch Petroleum Company was formed in 1890 to develop an oil field in Sumatra, following up on discoveries at Telaga Said in 1885. In 1907, Royal Dutch merged with the Shell Transport and Trading Company to form the Royal Dutch Shell Group, chartered in both the UK and the Netherlands.


The British Petroleum Company (now BP) began in 1909 as the Anglo-Persian Oil Company. Anglo-Persian was founded primarily to secure a West Asian oil supply for the British navy. It grew through a combination of signifi- cant oil discoveries—notably   the   Prudhoe Bay field in Alaska and the Forties field off the coast of Scotland—and through mergers and acquisitions—notably with Sohio, Arco, and Castrol.


Total began in 1924, when France created the Compagnie  Franc¸aise  des  Pe´troles  (CFP).  CFP was renamed Total in 1991. In 1999–2000,  it merged with the Belgian company PetroFina and the French company Elf Aquitaine.


Significant Developments and Discoveries. Oil wells appeared in Russia before 1848. Russian crude became internationally significant when, starting in 1873, the Nobel brothers (Ludwig and Alfred) and then the Rothschild family invested heavily in developing Russian oil fields. These efforts led to the widespread use of tankers for transportation and to the Baku-Bantum Railroad, which opened Western Europe to Russian Oil.


Developments in other counties followed:


1.      Indonesia: Telaga Said well (1885)

2.     United States, East Texas: Spindletop well (1901)

3.     Iran (1908)

4.     Venezuela: Zumaque well (1914)

5.     Iraq, Kirkuk (1927)

6.     Bahrain (1932)

7.      Kuwait (1937)

8.     Saudi Arabia (1938)

9.     United States, Alaska: Prudhoe Bay (1967)

10.  North Sea: Brent field (1976)

11.    United States, several sites: production from tight formations with fracking (ca. 2008)


Internal Combustion. In addition to providing kerosene for illumination, petroleum distillation yielded both heavier and lighter oils. The heavier products—gas oil and residue—served as bunker fuel for ships and for various lubricants, but significant amounts were dumped. Most of the lighter products, largely naphtha, were burned away.


The situation began to change in 1889, when Gottlieb Daimler, William Mayback, and (separately) Karl Benz built gasoline-powered automobiles, creating a niche market for naphtha. In 1893, Rudolf Diesel built his first internal combustion engine, based on a gas-oil-burning, 10-foot-long reciprocating iron cylinder with a flywheel at its base. He almost was killed when the engine exploded.


The advent of the Ford Model T in 1908 jump- started gasoline demand. It made automobiles more affordable, and by creating the US auto industry, it created a large, well-paid, American middle class.


Today, internal combustion engines comprise most of the world demand   for   petroleum, and 90% of the transportation fuel market is met by oil. The main lighter-than-kerosene fuel is gasoline, the main heavier-than-kerosene fuel is diesel, and kerosene itself is refined into jet fuel.


OPEC, Embargos, and Conservation. The Orga- nization of Oil Exporting Countries (OPEC) was founded by five countries in 1960. OPEC now includes 13 members: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. The organization—especially Saudi Arabia, which is the richest in reserves— strives to stabilize oil prices by acting as a “swing” producer, raising production when prices are high and cutting production when prices are low.


In 1967, during the Six-Days War with Israel, several Middle Eastern countries decreased or ceased oil shipments to the United States and the UK. This action had limited impact due to lack of solidarity among exporters. The story was differ- ent after the Yom Kippur War in 1973–1974, when the Arab members of OPEC, along with Syria and Egypt, proclaimed an embargo against the United States, the UK, Canada, Japan, and the Netherlands. World prices rose from $3 per barrel to $10 per barrel; US prices went up to $12 per barrel. Prices tripled again during 1978–1980 due to two crises in Iran—the Khomeini revolution and the subsequent war between Iran and Iraq. These decreased Iranian production by >4 million barrels per day (b/d).


Importers responded to the embargos with energy conservation measures, by stimulating domestic production, and by encouraging the development of alternatives to oil. In the United States, the Strategic Petroleum Reserve (SPR) was created in 1973 to counter sudden, severe supply interruptions. (In August 2015, the SPR held >695 million barrels, good for about 38 days.) Short-term conservation initiatives included gasoline rationing, decreased speed limits, year-round daylight savings time, and sim- ply turning off the lights. Long-term measures reaped long-term benefits. Factories invested in energy efficiency. People bought smaller vehicles with higher fuel efficiency. The measures worked. Demand dropped, and prices fell steadily, with occasional ups and downs, until 1998.


Recent Ups and Downs. In 1998, prices began to rise again, driven by rapid economic growth in India and China and OPEC’s disinclination to increase supply. Except for a brief dip after the 9/11 attacks on the United States in 2001, prices continued to climb. Figure 5 illustrates this volatility.


Fig. 5 Weekly spot-market price for Brent Crude, August 2007 through December 2015

Fig. 5 Weekly spot-market price for Brent Crude, August 2007 through December 2015


Up: In June 2008, the weekly-average spot price for Brent Crude reached   $141 [27].

Down: After the failure of major US financial institutions in September 2008, the world economy suffered, oil consumption fell, and so did oil prices. On December 12, 2008, Brent was selling for $40 per barrel.

Up: During the next 6 years, economies and oil prices recovered. Brent sold for $127 on March 9, 2012, and on September 5, 2014, it sold for $100.

Then seemingly overnight, oil prices plummeted, hitting $46 in January 2015 and $36 per barrel in December 2015.


There are three reasons for this:

1.      In the United States, circa 2010, an ingenious combination of horizontal drilling and hydraulic fracturing enabled production of light, sweet oil, and natural gas from previously inaccessible formations. In January 2015, the United States was once again both the world’s leading oil consumer and the world’s leading producer.

2.     A political accord diminished a long-standing embargo against Iranian oil, dumping more oil into an already glutted market.

3.     To date, OPEC has refrained from significantly decreasing its own production to prop up prices.





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