Crude oil is most commonly located in natural reservoirs under the ground. It can best be described as yellow to black in color and with an unpleasant odor. Crude oil is used to produce not only a range of fuels, but also petrochemical ingredients for plastics, inks, tires, pharmaceuticals, and a host of other products.

Since products made from crude oil are vital to the functioning of a modern economy having adequate supplies of crude oil on hand and access to a constant resupply of crude oil stocks has to be a priority item for the governments of countries that do not produce enough crude oil for their own needs. Unfortunately, the United States no imports about 70% of its crude oil needs at a cost of over $700 billion a year. This dependence upon foreign crude oil supplies imposes a serious risk to the health of the Us economy.

Crude Oil is a complex mixture consisting of up to 200 or more different organic compounds, mostly hydrocarbons. Different crude oils contain different combinations and concentrations of these various compounds. In America, current important crude oil production takes place in Alaska and the Gulf of Mexico. Crude oil produced in Alaska, moves south by pipeline to ocean shipping terminals and then moves by tank ship to the West Coast. From the tank ship, the crude again moves by pipeline to refineries along the west coast of the U.S.

From the Gulf of Mexico crude oil moves by underseas pipelines to refineries located primarily in the Houston, Texas area as well as in Louisiana. Crude oil production from the oil drilling rigs in the Gulf are subject to annual disruptions from hurricanes and tropical storms.

Crude oil is the term used for oil that is taken straight out of the ground. Crude oil is a “fossil fuel,” which means that it formed from organic remains over a period of millions of years. Since crude oil took millions of years to form it is a finite resource. We are now using this vital resource faster than new oil fields are being discovered. This is one of the reasons that crude oil prices are in a long term uptrend.

Crude oil is highly flammable and can be burned to create energy. Along with its sister hydrocarbon, natural gas, derivatives from crude oil make an excellent fuel. Crude oil is priced in terms of regional blends, each with different characteristics. Of these, certain blends are followed by traders, as they most reflect the overall value of oil, and therefore affect the way different blends are priced. Crude oil is not a single compound like water. It is a mixture of hydrocarbon molecules, some large and some small.

Crude oil is the oil companies lodestone and the higher its price the fatter their bottom line. Crude oil is measured in barrels. When crude oil first came into large-scale commercial use in the United States in the 19th century, it was stored in wooden barrels and the way it is measured has not changed over the years. Interestingly enough the sum of the parts extracted from crude oil during the refining process is larger than the original amount of crude oil being processed. This gain from processing the crude oil is similar to what happens to popcorn, it gets bigger after it is popped.

Crude oil is the world’s most actively traded commodity. Over the past decade, the NYMEX Division light, sweet (low-sulfur) crude oil futures contract has become the world’s most liquid forum for crude oil trading, as well as the world’s largest-volume futures contract trading on a physical commodity. Crude oil is so important as it is used to produce fuel for cars, trucks, airplanes, boats and trains. It is also used for a wide variety of other products including asphalt for roads, lubricants for all kinds of machines, plastics for toys, bottles, food wrap and computers.

Crude oil is converted to gasoline through a relatively simple refining process. The transformation of oil to gasoline begins with its extraction from the ground, after which it is usually loaded into large container ships that deliver the crude oil to refineries all over the world. Crude oil is the raw material of product production, so, if the price of the raw material rises, refiners, to defend their operating profit margins, will seek higher prices for the products as well. Likewise, if the price of the products rise, it will put upward pressure on crude, since, with the products now commanding a higher market price, there will be an extra incentive, creating more demand, to buy more crude, refine it into product, and sell it back into the market.

Over the next very few years crude oil will probably reach prices levels that we now think of as impossible. With crude oil being a finite resource, one that is critical in the manufacture of so many products, especially energy products, and with a drastic increase in demand from fast growing nations like China, India, Brazil, and Russia, the upward pressure on crude oil prices is not a temporary market condition.

The world community will be hard pressed to find the answers as to how to deal with a shortage of crude oil before serious disruptions occur from a shortage.