Oil has become the world’s most important source of energy. If it were not for oil, many of us would not be able to heat our homes, drive our cars, or watch our favorite show on Netflix. Even though it has such a huge impact on our daily lives, many people don’t know the difference between crude oil, petroleum products, and petroleum. Sometimes these terms are used interchangeably, which can be confusing, so here’s a general breakdown of what crude oil is.
What is crude oil?
Crude oil is a raw natural resource that’s extracted from the ground. We usually obtain it by drilling through the ground. Crude oil is a blackish-yellowish liquid that’s composed of hydrocarbon deposits and other organic materials. It is a limited resource because it cannot be replaced as quickly as we use it.
Crude oil was first developed during the industrial revolution and today, the U.S. economy is highly dependent on fossil fuels like crude oil. Since it is a limited resource and only a few counties control the largest oil reservoirs, supply and demand issues greatly influence prices and contribute to global political unrest.
How do we use it?
After we extract crude oil from the ground, we refine it using the process of distillation, which heats and separates the oil into different components. to create many different usable petroleum products for consumers, like gasoline, asphalt, and kerosene.
Other examples of products made from crude oil include:
- Diesel fuel
- Heating oil
- Jet fuel
- Petrochemical feedstocks
- Waxes
- Lubricating oils
- Plastics
Investing and trading
Knowing all of this, it’s fair to say that investing in the oil and gas industry can be extremely profitable, but it also can be very risky. Predicting crude oil prices is difficult and there are many different factors to take into account.
Two of the main risks of investing in crude oil are:
- Oil and gas stocks tend to be more volatile because they’re more sensitive to supply and demand changes.
- Oil companies are exposed to many legal and regulatory risks that may result from accidents like oil spills.
For commercial buyers and sellers of crude oil, it can be difficult to connect with optimal business partners. In these instances, using an oil and gas trading software can help you evaluate and identify profitable opportunities, whether you’re a buyer or a seller. An oil and gas trading software will also analyze the crude oil’s quality, logistics, and real-time market pricing. An AI-powered oil and gas trading software is a must-have for commercial buyers and sellers in the energy industry.
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