Petroleum (in Latin: oil from stone) has long been known to mankind. It was the bitumen which, according to the Holy Bible was used to make Noah’s Ark and Moses’ crib leaktight. It was also the main component of the “Greek fire” the Byzantines’ secret weapon. Oil has also a nice ecological record: its use for lighting saved the whales from extinction. But its importance in the world economy comes from cars and planes: today Oil supplies 35% of the world primary energy and oil products fuel 97% of all the world transportation, by land, by sea and by air.

Easy to ship and store, ideal fuel stuff, Oil is unfortunately very heterogeneously spread under the Earth crust, a fact which caused and still causes many conflicts. The oil share of our energy mix should decrease soon when we reach the so-called “peak oil”, but we shall still use oil for a long time to come.

Hydrocarbons are substances the molecules of which are mostly made of carbon and hydrogen atoms. They can be found as gases (natural gas, petroleum gas), as liquids (oil and gas condensates) or as solids (bitumen). Oil or petroleum is a liquid mixture of various hydrocarbons and some impurities, the composition of which depends from where it is found. Oil products are extracted from oil by distillation. They range from bitumen to LPG.
Oil and Gas are formed by the decomposition under heat of dead plankton and algae deposited on the ocean floor and then progressively buried under sediments. Between 2500 and 5000 m and under the high temperatures prevailing at these depths, those organic materials are transformed into liquid oil plus some gas. Below 5000 m, oil is “cracked” into gas as well.

Once “fabricated”, oil climbs toward the surface as it is less dense than the saltwater which saturates the porous rocks of the Earth crust. During its ascent, if oil encounters an impermeable layer, it is trapped and an oil deposit is formed. In those oil pockets, the lighter natural gas accumulates at the top, while the bottom of the deposit is filled with water. However, most of the petroleum is not trapped and oozes freely at the earth surface or the ocean floor.

There are many different kinds of crude oil found throughout the world. The best known are:

- The Arabian Light (reference Middle East oil),
- The Brent (reference North Sea oil),
- The WTI (West Texan Intermediate, reference US oil).

The lighter the crude oil, the wider the selection of oil products and the higher the price of the barrel.

First and foremost, oil is an energy source, the largest in the world. Oil products are used for household and industrial process heat. Heavy fuel is still used to generate electricity, though much less than in the 70’s and, as mentioned above, gasoline, gas oil and fuel oil meet 97% of the world transportation needs.

But petroleum is also a precious raw material, source of many non-energy products, straight from the refinery or issued from the petrochemical industry. 95% of the bitumen used in the world (notably as tar to coat the roads) comes from oil. 95% of all the various lubricants come from oil as well. Bitumen uses about 100 Mt oil per year, and lubricants use 50Mt/y.

It is the petrochemical industry which, through a series of chemical reactions, produces plastic materials, textile fibres, synthetic rubber, glues, detergents and most of the fertilizers. Actually, close to 8% of oil production is consumed by the petrochemical industry, say 200 Mt/y.

The map above (BP 2007) underlines to which extent the oil distribution underground is heterogeneous. Middle East alone is believed to host 100 billion tonnes of oil, 62% of the world proven reserves. Furthermore, their high grade crude is cheap to extract.
Unlike coal, 57% of Oil is consumed outside producing countries: A big advantage of oil (and of any liquid fuel) is the ease with which it can be transported and stored.
Crude oil and oil products are shipped through pipelines on land or in “supertankers” at sea. Transportation is rather inexpensive but can be vulnerable: Most sea shipments must cross very few straits: Ormuz, Malacca, Bosphorus and Suez. In addition, supertanker wreckages cause the infamous black tides (Torrey Canyon, Amoco Cadiz, Exxon Valdez, Prestige, Erika, etc.).
Oil is not consumed in the crude but as oil products out of refineries: gasoline, gas oil, jet fuel and fuel oil, all the way to bitumen. A refinery performs these transformations in two stages:

- Fractioned distillation of crude oil to separate their components according to their volatility (the lighter the product, the more expensive it is),
- Purification of each product through physical and chemical processes and careful mixing.

All those operations consume energy (as heat, steam, electricity and compressed air) as well as chemicals. As the market asks for more and more light products, gasoline, gas oil and jet fuel, refineries are added more and more cracker units to transform heavy products into light ones.

Totalling 1400 billion dollars, the fuel market (mostly oil products) amounted to 13,8% of the world goods market, or 53,9% of the raw materials market. No wonder, therefore, that the world economy is so sensitive to the price of the barrel of crude. Several events can explain its evolution since 1973.

The first two oil shocks, 1974 and 1979.
The reference price of the barrel shot from US $2.59 to US $35 from September 73 to 1981. These high prices boosted the non-OPEC oil production. In France, they triggered the acceleration of the nuclear programme and the promotion of energy conservation.

The 1986 Counter shock.
In 1986, Saudi Arabia decided to double its output: Prices then collapsed back to levels below 1974’s. But for a temporary peak during the first Gulf war, princes continued to decrease, reaching $10 per barrel in 1999. Then, following an agreement among producer states to cut on output, prices were stabilized around $25/bl.

The emergence of China.
Since the beginning of the 2000's, oil prices have reached historical highs. This price hike comes notably from the emergence of China and other rapidly industrializing states which consume more and more energy.

Between the extraction cost of crude oil and the price of gasoline at the pump, most of the difference is taxes, taxes in the producer state but mainly taxes in the consumer state.
Since around 1980, every year, new oil discoveries are achieved but every year, we consume roughly twice as much oil as is discovered. On a given year, one can only produce oil which was discovered some twenty years earlier. It is therefore clear that the present situation cannot last forever: some day, production shall no longer be able to follow the demand growth. That will be the Peak Oil.
Pessimists consider the peak as imminent (before 2010) and steep. Others think more of a plateau around 2030.
The point is, oil production will reach a maximum in relatively little time, which will trigger an escalation in the price of the barrel. That, in turn, will cause consumers to switch to other energy sources. That will also significantly deteriorate the economic situation of the poorest non producer states.

After the peak (or plateau), production will progressively decrease and oil will be more and more devoted to the uses where its is the most valuable, but the last drop of oil is still very far away.