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What Is the Petroleum Industry?

A man filling up his car with gasoline.
Vertically integrated oil companies may own or lease their own oil tankers.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 September 2014
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The petroleum industry is a collective term used to identify many different companies that engage in activities directly related to the production of petroleum products. The companies involved in this industry manage tasks that involve exploration for fresh reserves that can be used in the production of fuel oils, gasoline, and other essential petroleum-based products. Businesses that manage the extraction of these resources as well as refining and even transporting oil products are also considered essential components within the industry.

The various companies and functions involved in the petroleum industry are normally classed in one of three different categories, with acknowledgments that some companies engage in a series of activities that cross over these class boundaries. One category is known as upstream functions, which include the process of exploration that ultimately results in the location of petroleum reserves. This particular category also includes the refinement and development of crude oil or natural gas that can then be passed on to other companies for use in the creation of a wide range of goods and services.

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Midstream functions often focus on the processes used to transport petroleum and petroleum-based products to manufacturers who use the products in the creation of different goods or services. Within this category, one common example are oil tankers used to move the collected petroleum from one location to another. Oil pipelines that transport oil over land is another example. Essentially, any company involved in the transport of petroleum in any form would be considered a midstream company.

Downstream functions within the petroleum industry typically focus on the actual delivery of products to end-users. This would include direct delivery to retailers who would then offer petroleum-based products for sale to consumers. At the same time, companies that provide services to consumers through refining and utilizing petroleum products for climate control and similar purposes would also fall into this category. It is important to note that in some countries, the midstream and downstream functions are often so integrated within the company structures that all these functions are classed as downstream, eliminating the designation of midstream altogether.

The petroleum industry impacts just about every facet of modern life. In addition to providing fuels and lubricating compounds for private and public transportation, the industry also provides fuel for machinery used in the production of energy that helps to heat and cool public and private buildings. Furniture is often composed of petroleum byproducts. Even some forms of clothing contain fibers made from the leftovers of the petroleum refining process. From this perspective, the petroleum industry affects the lives of consumers, even if they do not actively purchase gasoline or oil for use in private vehicles.

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