Global trade is an ever-present influence on the economies of nations, and there is more trade internationally in crude oil or petroleum than in anything else. The oil trade refers to the extraction, transportation, and refinement of crude oil to be sold in markets all around the globe. Trade in crude oil and its products are a complex web of wells, offshore platforms, pipelines, tankers, and refineries. Oil has important worldwide political ramifications because of its very high importance as an energy source.
In the oil trade, as with others, products flow first to the markets that provide the highest value to the supplier. All else being equal, this will mean that the nearest markets receive the product first, because it costs the least for the supplier to get it there. After the nearest market’s needs are met, the product goes to the next nearest, and so on.
This phenomenon is visible in the fact that while the Middle East exports vastly more oil than any other region, oil consuming countries in the Western Hemisphere, such as the United States, tend to rely more heavily on oil produced in other Western Hemisphere countries, such as Canada, Mexico, and Venezuela. It is worth noting, however, that there is real global dependence on Middle Eastern oil, especially in the countries of the Far East.
There are four main types of crude oil resources: conventional oil, heavy oil, extra heavy oil, and bitumen, a semi-solid form of crude oil such as is found in the Canadian oil sands. Conventional oil represents only about 30% of the world’s oil reserves. Whereas conventional oil can be extracted using traditional oil well methods, the heavier oils and bitumen are sometimes so thick and heavy that they need to be heated or diluted before they will flow.
Two main types of transportation, tankers and pipelines, are essential in the oil trade.
Tankers make possible the oil trade between continents, and are an efficient, low-cost way to accomplish this. Tankers of various sizes are employed, depending on the distance that the oil needs to be transported. Exports from the Middle East, for example, are typically of high volume and need to travel long distances. The tankers used for these exports can carry over 2 million barrels of oil per voyage.
On the other hand, pipelines are used to transport oil over land and across continents. Pipelines are almost always the most cost-effective method for oil transportation over land. In the United States alone, there are roughly 200,000 miles (321,869 km) of oil pipelines crisscrossing the continent from regions that produce oil to those that consume it.
Refining is one of the final stages in the journey that is the oil trade. Crude oil refinement is also called distillation, because the oil is heated and put into a distillation column. As it is heated, different products, or “distillates,” boil off at different temperatures and are then recovered, transported, and sold as the products we use every day, such as diesel fuel, gasoline, and home heating oil.