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Definition: petroleum from Dictionary of Energy

Oil & Gas, a collective term for crude oil, natural gas, natural gas liquids, and other related products, usually found in deposits beneath the earth’s surface and thought to have originated from plant and animal remains of the geologic past. Petroleum is a naturally occurring mixture of hydrocarbon and nonhydrocarbon compounds that may be found in a gaseous, liquid, or solid state, depending on the nature of the compounds and conditions of temperature and pressure. It is the most widely used fuel source in the industrialized world and is also used in many industrial products, such as plastics, synthetic fibers, and fertilizers.

Summary Article: Petroleum from Encyclopedia of Environment and Society

PETROLEUM, OR CRUDE oil, is a nonrenewable natural resource that has had a tremendous beneficial influence on human society. With a name derived from Latin petra (rock) and oleum (oil), petroleum represents the world’s most important energy resource. Such fuels as gasoline, diesel fuel, jet fuel, heating oil, and related oils power the world’s transportation system, provide electrical power for industrial production, and produce heat for human populations residing in cold-weather climates. In addition to its many energy uses, petroleum is also an important raw material resource used in the manufacture of a wide array of products that provide significant societal benefits. Petroleum is the raw material input in the production of many fertilizers and pesticides, which are largely responsible for increased agricultural production and efficiency.

Most of the world’s consumer products contain plastics and other materials derived from petroleum. Petroleum has positively impacted most segments of human life; for example, the medical industry has developed life-saving, petroleum-based implants. While the vast benefits of petroleum energy and products are clear, the production and consumption of oil has come at a price to the natural environment (e.g., pollution and oil spills) and to human populations themselves (e.g., war and production facility accidents).


The formation of petroleum can be traced back hundreds of millions of years to ancient microscopic plants and bacteria. These living organisms were able to convert the energy from the sun directly for their own sustenance. These organisms, residing in the ancient seas that covered the earth, sank to the sea floor upon death. Over time, sedimentary layers of silt trapped the nondecayed organic matter in what would later become source rock. Sedimentary layers accumulated above the organic materials, and combined with the weight of the ocean, exerted great pressure and heat. Over time, this pressure and heat transformed the organic source material into the hydrocarbon we now know as petroleum. This process is similar to the formation of natural gas, which is a reason why petroleum and natural gas are often found at similar locations in the earth’s crust today.

Over time and under extreme pressure, petroleum was squeezed into the crevices of relatively porous sandstone or limestone, called reservoir rock. Subsequent deformation of the earth’s crust acted to trap petroleum into pockets under dense, impenetrable cap rock like marble or granite. The three main geologic forces trapping petroleum into pockets within the earth’s crust are folding, faulting, and pinching out. Folding results from horizontal pressure being exerted on the cap rock, forming a fold (or anticline). The resulting bell-shaped fold in the cap rock serves to trap petroleum. Faulting represents a fissure in the cap rock, with a large section of cap rock slipping down, forming a petroleum-trapping cavity. In the pinching out process, impenetrable rock is forced upward into the reservoir rock, resulting in petroleum-trapping pockets. Each of these geologic formations has the potential to hold reservoirs of petroleum, allowing geologists today to predict the possible locations of underground reserves.

As with other natural resources, petroleum’s status as a resource began with its recognized use and value to human populations. Ancient civilizations located petroleum seeping to the surface of rivers and lakes. Over time, medicinal uses for petroleum, such as for skin ailments, were realized, and petroleum was used to waterproof canoes and water buckets and provide a base for paint.


While the first oil wells were drilled in China as early as the 4th century, the modern petroleum industry in the United States began in 1859 near Titusville, Pennsylvania. “Colonel” Edwin Drake struck oil nearly 70 feet below the earth’s surface using a wooden derrick and drill, and stored the oil in wooden whisky barrels and vats. At this time, petroleum (“rock oil,” as kerosene was called) was used primarily as a fuel for illumination, a cheaper alternative to whale oil. By 1879, the development of the electric light bulb by Thomas Edison provided a cleaner, safer alternative for illumination. Soon electricity-generated lighting forced the oil industry to the brink of extinction.

A new market, however, appeared in the form of the automobile. Henry Ford’s “horseless carriage” was powered by the internal combustion engine, which in turn was powered by petroleum-derived gasoline. The automobile would come to transform American society, increasing mobility while also increasing dependence on petroleum. The geopolitical importance of oil became fully realized during World War I and II. Oil soon powered ships, planes, tanks, and troop transports. While securing oil figured prominently in Japanese and German war plans, America’s plentiful supply of oil proved decisive in allied victories in Europe and the Pacific.

The post-war suburbanization of the United States was largely enabled by the automobile and an improved highway system. During the 1970s, the energy crises stemming from the oil embargo by the Organization of the Petroleum Exporting Countries (OPEC) and the Iranian revolution sent prices of oil and gasoline to new heights, causing global panic. Between 1980 and 1988, the Iran-Iraq war was fought largely for control of oil fields. Iraq’s invasion of Kuwait in 1991 was also an attempt by Iraq to garner additional oil fields, as well as to acquire Kuwait’s superior port and oil export facilities. The U.S.-led invasion of Iraq in 2003 and the ongoing war has contributed, in tandem with the threat of terrorism in the Middle East, to geopolitical uncertainties that have helped drive up the current price of oil.


The process of moving crude oil from its location within the earth’s crust to delivering the final product to the consumer is a complicated process involving upstream (exploration and extraction), midstream (refining), and downstream (distribution to customers) activities. Each of these steps takes place in different (and often distant) locations, forming an intricate pattern of trade and capital flows.

Exploration is done to locate possible petroleum deposits. Most exploration is done using seismology, sending a seismic wave through the earth’s crust, recording the reflecting waves, and mapping the underground geologic formations. On land, seismic waves are produced by vibrator trucks, which stomp the ground with a large rectangular foot. Offshore, a compressed air gun is used. Technological innovations, using advanced computer developments, have enabled geologists to construct three- and four-dimensional images of the crust’s geology, increasing the success rate of finding productive oil deposits. Such computer-assisted exploration is costly; a 100-square-kilometer exploration area costs $1 million.

Refining, which transforms crude oil into usable products, is yet another costly and involved process. Physical (heating and boiling) and chemical (cleaning and additives) processes separate crude oil into its usable products. For a given barrel of crude oil, nearly half ends up in the form of gasoline. Other important by-products are diesel fuel, jet fuel, residual fuel oil, liquefied gasses, petroleum coke, asphalt oil, lubricants, and kerosene. Other by-products serve as “feederstock” for fertilizers and petrochemicals.


As petroleum was formed under certain circumstances, and petroleum reserves trapped by certain geologic processes, oil is found in certain locations in the earth’s crust. As a result, some countries have sizeable reserves of petroleum, while most do not. An appropriate measure of potential supply is the amount of proved reserves. These represent the amount of identified and usable petroleum that is available at current market prices and under current extraction technologies.

The Middle East houses approximately 67 percent of the world’s petroleum reserves, making this volatile region vital for the future supply of oil to world markets. The largest proved reserves of petroleum in the world are found (in descending order) in Saudi Arabia, Canada, Iran, Iraq, United Arab Emirates, Kuwait, Venezuela, Russia, Libya, Nigeria, and Kazakhstan. One measure of current supply is production, the actual extraction of crude oil ready for processing or export. The largest oil producers in the world are (in descending order) Saudi Arabia, Russia, the United States, Iran, Mexico, China, Norway, Canada, Venezuela, and Nigeria.

In terms of demand, the best measure is consumption. The United States is by far the world’s major user of petroleum, consuming an astounding 25.5 percent of total world consumption. This figure is particularly large in comparison to the second-largest consumer, Japan, which consumes 6.8 percent of the world total. The other major oil consumers in the world (in descending order) are China, Germany, Russia, Canada, Brazil, India, South Korea, and France. The main variables explaining oil consumption are high levels of industrialization and/or large human populations.


The extraction, refining, and consumption of petroleum and petroleum-based products have stimulated astounding levels of revenue and wealth. The top oil companies rank among the world’s largest and most profitable corporations. The countries of Kuwait, United Emirates, and Qatar owe their placement in the World Bank’s “high income” category to the abundant amounts of petroleum that happen to lie underneath their territory.

While the economic benefits may be great, oil wealth has not always translated into economic prosperity. OPEC members Nigeria and Indonesia remain poverty-stricken countries with rampant corruption and instability. Even Saudi Arabia, the world’s top oil producer and exporter, has income and development levels far below those expected given its oil endowment. Per capita gross domestic product in Saudi Arabia places this oil-rich country alongside Poland and Latvia in world rankings. The observation that oil wealth is not always a blessing for countries has led to the development of the concepts of the “resource curse” and “Dutch Disease.” During the 1960’s the Netherlands discovered extensive oil and gas deposits, creating a so-called “oil boom.” Despite its newfound source of wealth, the Netherlands experienced slower economic growth and lower economic performance, as well as higher rates of inflation. These symptoms were later termed “Dutch Disease.”

Other variants have resulted in countries where an increase in oil revenue has led to economic distortions, resulting in the inefficient use of human and monetary resources. Such distortions include corruption, abnormally high wages, over-borrowing, and complacency that emphasizes short-term gains at the expense of long-term planning. These distortions ultimately lead to economic inefficiencies, resulting in lower economic growth and performance. In many cases, oil wealth is distributed highly unevenly, leading to regional inequalities, and often heightening already existing regional conflicts, occasionally escalating into civil war.


The negative effects of the extraction, transportation, and use of petroleum on the natural environment are substantial. Perhaps the most visual negative impacts on the environment are oil spills from seagoing vessels. One of the most highly publicized spills was the 1989 Exxon Valdez spill off the coast of Alaska, which emptied more than 10 million gallons of oil. This was the worst oil spill in U.S. history, killing wildlife, disrupting entire ecosystems, and creating an unnatural eyesore. Images of oilsoaked sea otters and dead, oil-drenched cormorants united environmentalists around the world in their further disdain for large oil companies. Other notable spills include the 1991 deliberate release by Iraq of 240–460 million gallons of crude oil into the Persian Gulf, and the 2002 Prestige leak of 20 million gallons off the coast of Spain.

Further environmental problems associated with the burning of oil and gasoline include air pollution, smog, acid rain, and the human-induced greenhouse effect.

  • Exxon Valdez; Fossil Fuels; Greenhouse Effect; Greenhouse Gases; Natural Gas; Oil Spills; Organization of Petroleum Exporting Countries (OPEC); Persian Gulf; Persian Gulf Wars; Pollution, Air.

  • Tim Appenzeller, “The End of Cheap Oil,” National Geographic (v.205, 2004).
  • Fadhil J. Chalabi, “OPEC: An Obituary,” Foreign Policy (v.102, 1997).
  • Public Broadcasting Service, “Extreme Oil,” (PBS, 2004).
  • Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (Free Press, 1991).
  • Kristopher White
    Kazakhstan Institute of Management, Economics, and Strategic Research
    Copyright © 2007 by SAGE Publications, inc.

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