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Crude Oil: Political Fodder?

With all the publicity nowadays surrounding the price of Crude Oil, I resolved to write an enlightening article on the backdrop of the so-called "Black Gold." I'll briefly go over history, environmental effects, pricing and the future of the thick black sludge that is coveted by every major economy in the world. Hopefully you can reach a better point of view on the subject.

The history of Crude Oil is too immense to discuss in this brief editorial so I will limit it to a general overview. The first oil wells were drilled in China in the 4th century. They where as much as 243 meters deep and were drilled utilizing drill bits attached to bamboo poles. The contemporary history of crude began in 1846, with the breakthrough of the process of refining kerosene from coal by Atlantic Canada's Abraham Pineo Gesner. The first rock oil mine was built in Bobrka, Poland the following year. These breakthroughs rapidly spread around the world, and Meerzoeff built the first Russian refinery in the mature oil fields at Baku in 1861.

James Miller Williams in Oil Springs, Ontario, Canada in 1858, excavated the first commercial oil well drilled in North America. The American petroleum industry commenced with Edwin Drake's discovery of oil in 1859, near Titusville, Pennsylvania. The industry matured slowly in the 1800s, driven by the demand for kerosene and oil lamps. It became a major national business in the early part of the 20th century. With the introduction of the internal combustion engine came a need that has largely sustained the industry to this day.
While we all need to get to work in some way or another, rarely does anyone consider the environmental effects of the fuel that powers our mode of transportation. Yes we know that the emissions from are cars, buses and trains have a green house effect on our delicate environment; but what about the rest of our ecology?

Oil extraction is costly and occasionally environmentally detrimental, although Dr. John Hunt from the Woods Hole Oceanographic Institution revealed in a 1981 paper that over 70% of the reserves in the world are associated with visible macroseepages, and numerous oil fields are found due to natural leaks. Offshore exploration and extraction of oil agitates the encompassing marine environment. Exploration could call for dredging, which stirs up the sea bottom, stamping out the ocean plants that nautical creatures need to survive. Not to mention the typical Crude Oil and refined fuel spills from tanker ship accidents. All of these factors have tainted frail ecosystems all over the world.
Petroleum products are priced like most commodities: supply and demand. While this may sound simple, the actual start to finish process can be a lot more complex subject. References to oil prices are generally related to the spot price of either WTI/Light Crude as traded on New York Mercantile Exchange (NYMEX). Priced by the barrel, Crude Oil is rapidly becoming the most costly commodity on the market (second only to Gold).

Oil pricing is extremely reliant on both its grade and location. The vast majority of oil will not be traded on an exchange but on an over-the-counter basis, typically with reference to a standard crude oil grade that is quoted via a pricing agency such as Argus Media Ltd or Platts. It is often claimed that OPEC arranges the oil price and the real monetary value of a barrel of oil is in the area of $2, which is equivalent to the cost of extraction of a barrel in the Middle East. These appraisals of costs disregard the cost of finding and developing oil reserves.

You can't talk about the future of oil without talking about the "Hubbert Peak" oil theory. This hypothesis depicts the long-term rate of production of conventional oil and other fuels. It assumes that oil reserves are not replenishable. It also predicts that future world oil production must unavoidably reach a crest and then decline as these reserves are exhausted. Like every other theory of any importance it is highly controversial. "When will the Oil actually start to run out?" is the big question.

No matter how you look at it, our society needs to concentrate more efforts on either alternative fuels or more fuel-efficient modes of transportation. While I'm sure that the oil won't peter out in my life time I would like to think we can leave this world a better place for future generations.

In closing, I hope this article has given you a better understanding of the topic and made you a more informed consumer. So the next time your grumbling at the price of gas, at least you'll understand what you're complaining about. If you would like to read more on the topic of Crude Oil, you can visit http://www.crudeoilrefinerysite.com/ or you can read any of the quality resources at the end of this article.

Books about the petroleum industry:

James Howard Kunstler (2005). The Long Emergency: Surviving the Converging Catastrophes of the Twenty-first Century. Atlantic Monthly Press.
C.J. Campbell (2004). The Coming Oil Crisis.

Peter Odell (2004). Why Carbon Fuels Will Dominate the 21st Century's Global Energy Economy. Multi Science.

About the Author
Stephen Nelson is a professional commodoties trader that specializes in the energy markets. His background is in computers and diagnostiv imaging. You can find more information at http://www.crudeoilrefinerysite.com/

Storage of Natural Gas in Depleted Natural Gas and Oil Fields

Natural gas is put in storage during the summer months when demand is lower for the upcoming winter season. Most of the natural gas is stored underground. In the United States most of the natural gas is stored in depleted oil and natural gas fields. There are a lot of these fields and they already have the infrastructure in place to accumulate the natural gas and the pipeline connections to distribute it. The most popular depleted fields are ones close to high usage areas. Not all fields are ideal for this natural gas storage.

Natural gas storage companies use depleted fields that are well sealed without a lot of compartments that can hold and release the gas efficiently. These fields are rock formations and despite the use of the latest technologies to inspect the formation gas can still escape into unforeseen areas where it can't be extracted. Advanced reservoir modeling, visualization and simulation techniques used in natural gas exploration and production are being used by some companies to better understand the field prior to storage.

One focus of research in natural gas storage management is on installing horizontal wells in existing storage fields. These horizontal wells increase the speed in which the natural gas can be injected and withdrawn from the field. This increased speed really helps on the delivery end as the gas can be delivered faster during high demand periods. The horizontal wells also reduce the number of wells needed to operate in a storage field.

About 13% of the natural gas used in the United States comes from storage facilities. There are around 400 storage reservoirs located predominantly near the major Eastern markets and middle of the country markets. There is almost 4 trillion cubic feet of storage capacity. There are three types of storage used for natural gas: depleted oil and gas reservoirs, salt caverns and aquifers. Depleted oil and gas reservoirs account for 87% of the total storage capacity, salt caverns 3% and aquifers 10%.

Pipeline companies are the main owners and operators of these storage facilities. These pipeline companies don't necessarily own the natural gas in storage. Most of this gas is leased by the distribution companies or the end users. The pipeline companies purchase the natural gas from oil companies like, Western Pipeline Corporation, and sell it to distribution companies or end users. Their storage facilities are used to hold this natural gas that has been sold or leased to these companies.

About the Author
Mickey Horn is the Executive VP of Investor Relations of Western Pipeline Corporation. Western Pipeline Corp specializes in identifying, acquiring and developing existing, producing reserves on behalf of its individual clients.

How Do Seismic Surveys Locate Oil?

The first oil was found simply by looking at an oil seep on the surface of the earth. Today, oil prospectors have extensive knowledge of the earth's geology and can see where oil might be located underground. The first underground oil was extracted by accident while drilling for water in West Virginia during the beginning of the nineteenth century. Since then, we have learned to look for geological features, such as buckles and domes, which suggest there may be oil pushing up against the layers of earth.


Prospectors also know that oil is most likely to be found in sedimentary rock basins. What used to be a never-ending exploration from the ground is now a technologically advanced operation consisting of satellite scans and radar images. Once a likely place is found, a geophysical analysis is conducted. These surveys can give us clues as to where the oil might be. Clues encompass things like gravitational fields and the earth's magnetism that may be created or altered by the presence of oil beneath the surface.

A seismic survey is another way that we can try to predict where an oil trap may be. Vibrations are sent into the ground. Different frequencies reflect differently from each unique type of rock. This data is used to draw a computer model of what the layers of earth look like beneath the ground being surveyed. Traps and bubbles can usually be seen and some of these actually contain oil and gas. The only way to really know is to drill down and see if there is anything there. Seismic survey is a lot like an ultra-sound of the earth's surface.

Seismic surveys are conducted by setting off vibrations from explosive charges or by special trucks designed to shake the ground by hitting it with a giant hydraulic pad. The hydraulic pad hits the ground with tremendous force and speed sending vibrations very deep into the ground. Geophones record and amplify the sounds that are reflected back to the earth's surface. These recordings are translated into pictures that we can see and analyze.
We can also hunt for oil under the sea by using seismic surveys. Powerful air guns are towed on cables behind the boat. The air gun releases a blast of compressed air towards the sea floor. Echoes come back and are collected by sound-detecting hydrophones. This gives us a clear picture of what the surface of the sea bed looks like. We use many tow lines behind multiple boats to collect enough data to give us a three dimensional view of the bottom of the sea. Then oil prospectors can analyze the data, compare it to similar features found on the surface of the earth and determine where oil might be found. We used to use dynamite to create the seismic sound, but the use of air guns has greatly reduced the amount of pollution and marine-life death that the dynamite once caused. Specific guidelines are followed to keep the disturbance of marine animals to a minimum.

About the Author
About the Author: Mickey Horn is the Executive VP of Investor Relations of Western Pipeline Corporation. Western Pipeline Corp specializes in identifying, acquiring and developing existing, producing reserves on behalf of its individual clients.