Finding Crude Oil
In a modern world, mineral oil is an indispensable product. It is used for petroleum, heating, lubrication, in paints, and in other petrochemical applications such as plastics, road surfacing (bitumen), ripening hormones, chemical feedstocks, detergents, solvents, and many other chemical uses. Without it industry, transport, agriculture, merchandising, and chemical manufacture among others would still be somewhat “primitive” by current standards, and the world would be a quite different place.
Mineral oils are referred to generally as “crude” oils, but there are several grades of crude, among them sweet crude and light sweet crude. Sweet crude has a lower sulfur content than lower grades, and light has a lower wax content. Sulfur and wax are impurities, and both sweet crude and light sweet crude also have lower quantities of other impurities, and the term “sweet” is used because the oil has a slightly sweet taste, a fact discovered by nineteenth century prospectors who would apply a taste test to their discoveries. The quality can also, to some extent, be judged by smell, as good quality crude has a relatively pleasant odor. Oils with more impurities are referred to as “sour” crude.
Light sweet crude has both lower sulfur and lower wax contents. The lower wax makes the oil more viscous, which is a distinct advantage in pumping and handling, and has less clogging properties. Light sweet crude also contains more of the “fractions”, the hydrocarbons like paraffins, aromatics, napthenes, alkenes, dienes, and alkynes which are converted into the high grade fuels like kerosene, petroleum, and high-quality diesel, arguably the three most important uses of oil, at least in terms of volume, and thus obtains the highest price. It is the light sweet crude price which is the price benchmark usually quoted in financial reports on our daily news programs.
This popularity puts great demands on the oil fields which produce light sweet crude. Sweet crude is mainly found in some American fields (Appalachian Basin, Louisiana, West Texas, Alaska), North Sea fields, parts of Africa, the Middle East, and in South East Asia, including Australia. This high demand is depleting stocks, and although refineries can, and will if necessary, work with heavier oils, the quality of product made in this way is inferior. With the rising difficulty in finding light sweet crude the price of the premium fuels is also rising, which rebounds on the consumer in terms of fuel costs, transport costs, and air fares. This effect on our lives will become greater as time passes.
The importance of oil can be seen in the fact that it is the world’s most actively traded commodity. Sweet crude futures contracts are the world’s largest volume commodity trading medium, and the value of an oil contract, based on the price of 1000 barrel units delivered to Cushing, Oklahoma, is the world benchmark price, which is as important to economic markets as the gold or other commodities prices in planning future activities.
This price is dependent not only on availability, but also on demand, which fluctuates depending on other economic factors. For instance, oil prices dropped as low as US$16 a barrel in January 1999 when the Asian economic crisis and increased Iranian production both reduced demand and increased availability. Since then the price has gone as high as US$147 in July 2008, with a decline in the value of the US dollar and increasing tensions in the oil-producing region of the Middle East, especially the furor over Iran’s possible nuclear capacity. Since then the price has dropped back to around US$40 a barrel. Today’s price is US$49.30. This fluctuation in oil prices and the consequent fluctuations in consumer prices for oil-based products and services is likely to be an ubiquitous factor in our medium term future.