[Infographic] A Crude Awakening: The Global Black Market for Oil
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Crude Awakening: The Global Black Market for Oil

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A Crude Awakening: The Global Black Market for Oil

A Crude Awakening: The Global Black Market for Oil

The value of the crude oil production alone is worth a staggering $1.7 trillion each year. Add downstream fuels and other services to that, and oil is a money-making machine.

Both companies and governments take advantage of this resource wealth. More of the world’s largest companies work in the oil patch than any other industry. At the same, entire government regimes are kept intact thanks to oil revenues.

The only problem when an industry becomes this lucrative?

Eventually, everybody wants a piece of the pie – and they’ll do anything to get their share.

The Black Market in Fuel Theft

Today’s infographic comes from Eurocontrol Technics Group, and it highlights the global problem of fuel theft.

While pipeline theft in places like Nigeria and Mexico are the most famous images associated with the theft of hydrocarbons, the problem is actually far more broad and systematic in nature.

Fuel theft impacts operations at the upstream, midstream, and downstream levels, and it is so entrenched that even politicians, military personnel, and police are complicit in illegal activities. Sometimes, involvement can be traced all the way up to top government officials.

E&Y estimates this to be a $133 billion issue, but it’s also likely that numbers around fuel theft are understated due to deep-rooted corruption and government involvement.

How Fuel Theft Actually Happens

Billions of dollars per year of government and corporate revenues are lost due to the following activities:

Tapping Pipelines: By installing illicit taps, thieves can divert oil or other refined products from pipelines. Mexican drug gangs, for example, can earn $90,000 in just seven minutes from illegal pipeline tapping.

Illegal Bunkering: Oil acquired by thieves is pumped to small barges, which are then sent to sea to deliver the product to tankers. In Nigeria, for example, the Niger Delta’s infamous labyrinth of creeks is the perfect place for bunkering to go undetected.

Ship-to-Ship Transfers:
This involves the transfer of illegal fuel to a more reputable ship, which can be passed off as legitimate imports. For example, refined crude from Libya gets transferred from ship-to-ship in the middle of the Mediterranean, to be illegally imported into the EU.

Armed Theft (Piracy):
This involves using the threat of violence to command a truck or ship and steal its cargo. Even though Hollywood has made Somalia famous for its pirates, it is the Gulf of Guinea near Nigeria that ships need to be worried about. In the last few years, there have been hundreds of attacks.

Bribing Corrupt Officials:
In some countries – as long as the right person gets a cut of profits, authorities will turn a blind eye to hydrocarbon theft. In fact, E&Y says an astonishing 57.1% of all fraud in the oil an gas sector relates to corruption schemes.

Smuggling and Laundering:
Smuggling oil products into another jurisdiction can help to enable a profitable and less traceable sale. ISIS is famous for this – they can’t sell oil to international markets directly, so they smuggle oil to Turkey, where it sells it at a discount.

Adulteration:
Adulteration is a sneaky process in which unwanted additives are put in oil or refined products, but sold at full price. In Tanzania, for example, adding cheap kerosene and lubricants to gasoline or diesel is an easy way to increase profit margins, while remaining undetected.

The Implications of Fuel Theft

The impact of fuel theft on people and the economy is significant and wide-ranging:

Loss of corporate profits: Companies in oil and gas can lose billions of dollars from fuel theft. Case in point: Mexico’s national oil company (Pemex) is estimated to lose $1.3 billion per year as a result of illegal pipeline tapping by gangs.

Loss of government revenues: Governments receive royalties from oil production, as well as tax money from finished products like gasoline. In Ireland, the government claims it loses €150 to €250 million in revenues per year from fuel adulteration. Meanwhile, one World Bank official pegged the Nigerian government’s total losses from oil revenues stolen (or misspent) at $400 billion since 1960.

Funds terrorism: ISIS and other terrorist groups have used hydrocarbon theft and sales as a means to sustain operations. At one point, ISIS was making $50 million per month from selling oil.

Funds cartels and organized crime: The Zetas cartel in Mexico controls nearly 40% of the fuel theft market, raking in millions each year.

Environmental damage: Not only does fuel theft cost corporations and governments severely, but there is also an environmental impact to be considered. Fuel spills, blown pipelines, and engine damage (from adulterated fuel) are all huge issues.

Leads to higher gas prices: Unfortunately, all of the above losses eventually translate into higher prices for end-customers.

How to Stop Fuel Theft?

There are two methods that authorities have been using to slow down and eventually eliminate fuel theft.

Fuel dyes are used to color petroleum products a specific tint, so as to allow for easy identification and prevent fraud. However, some dyes can be replicated by criminals – such as those in Ireland who “launder” the fuel.

Molecular markers, which are used in tiny concentrations of just a few parts per million, are invisible and can also be used to identify fuels.

In Tanzania, the initiation of a fuel marking program using molecular markers led to significant increases of imported petrol and diesel for the local market, and a decrease of kerosene.

At the retail level, product meeting quality standards increased from 19% in 2007 to 91% in 2013. Ultimately, this resulted in an increase of tax revenue of $300 million between 2010 and 2014.

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What’s Made from a Barrel of Oil?

Oil is a building block that makes modern life possible. Here are the proportion of finished products that are created from a barrel of oil.

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What Products Are Made from a Barrel of Oil?

This was originally posted on Elements. Sign up to the free mailing list to get beautiful visualizations on natural resource megatrends in your email every week.

From the gasoline in our cars to the plastic in countless everyday items, crude oil is an essential raw material that shows up everywhere in our lives.

With around 18 million barrels of crude oil consumed every day just in America, this commodity powers transport, utilities, and is a vital ingredient in many of the things we use on a daily basis.

This graphic visualizes how much crude oil is refined into various finished products, using a barrel of oil to represent the proportional breakdown.

Barrel of Oil to Functional Fuel and More

Crude oil is primarily refined into various types of fuels to power transport and vital utilities. More than 85% of crude oil is refined into fuels like gasoline, diesel, and hydrocarbon gas liquids (HGLs) like propane and butane.

Along with being fuels for transportation, heating, and cooking, HGLs are used as feedstock for the production of chemicals, plastics, and synthetic rubber, and as additives for motor gasoline production.

Refined Crude Oil ProductShare of Crude Oil Refined
Gasoline42.7%
Diesel27.4%
Jet fuel5.8%
Heavy fuel5.0%
Asphalt4.0%
Light fuel3.0%
Hydrocarbon gas liquids2.0%
Other10.1%

Source: Canadian Association of Petroleum Producers

Crude oil not only powers our vehicles, but it also helps pave the roads we drive on. About 4% of refined crude oil becomes asphalt, which is used to make concrete and different kinds of sealing and insulation products.

Although transportation and utility fuels dominate a large proportion of refined products, essential everyday materials like wax and plastic are also dependent on crude oil. With about 10% of refined products used to make plastics, cosmetics, and textiles, a barrel of crude oil can produce a variety of unexpected everyday products.

Personal care products like cosmetics and shampoo are made using petroleum products, as are medical supplies like IV bags and pharmaceuticals. Modern life would look very different without crude oil.

The Process of Refining Crude Oil

You might have noticed that while a barrel of oil contains 42 gallons, it ends up producing 45 gallons of refined products. This is because the majority of refined products have a lower density than crude oil, resulting in an increase in volume that is called processing gain.

Along with this, there are other inputs aside from crude oil that are used in the refining process. While crude oil is the primary input, fuel ethanol, hydrocarbon gas liquids, and other blending liquids are also used.

U.S. Refiner and Blender InputsShare of Total
Crude oil85.4%
Fuel ethanol4.8%
Blending components3.5%
Hydrocarbon gas liquids3.0%
Other liquids3.3%

Source: EIA

The process of refining a 30,000-barrel batch of crude oil typically takes between 12-24 hours, with refineries operating 24 hours a day, 365 days a year. Although the proportions of individual refined products can vary depending on market demand and other factors, the majority of crude oil will continue to become fuel for the world’s transport and utilities.

The Difficulty of Cutting Down on Crude Oil

From the burning of heavy fuels that tarnish icebergs found in Arctic waters to the mounds of plastic made with petrochemicals that end up in our rivers, each barrel of oil and its refined products impact our environment in many different ways.

But even as the world works to reduce its consumption of fossil fuels in order to reach climate goals, a world without crude oil seems unfathomable.

Skyrocketing sales of EVs still haven’t managed to curb petroleum consumption in places like Norway, California, and China, and the steady reopening of travel and the economy will only result in increased petroleum consumption.

Completely replacing the multi-faceted “black gold” that’s in a barrel of oil isn’t possible right now, but as electrification continues and we find alternatives to petrochemical materials, humanity might at least manage to reduce its dependence on burning fossil fuels.

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Mapped: Visualizing U.S. Oil Production by State

The U.S. is the largest oil producer in the world. Here we map the share of oil production in the country by all 50 states in 2020.

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Map of U.S. Oil Production by State

Mapped: Visualizing U.S. Oil Production by State

In 2018, the United States became the world’s top crude oil producer. It has strongly held this position ever since.

According to the U.S. Energy Information Administration (EIA), the country accounted for nearly 15% of the world’s total oil production in 2020, churning out close to 13 million barrels of crude oil per day—more than Russia or Saudi Arabia.

Although total U.S. oil production declined between 1985 and 2008, annual production increased nearly every year from 2009 through 2019, reaching the highest amount on record in 2019.

The Dominant Oil Producing States

Impressively, 71% of total U.S. oil production came from just five states. An additional 14.6% came from the Gulf of Mexico, which is a federal jurisdiction.

Here are the five states that produce the largest amount of crude oil:

RankStateOil Production
(billion barrels)
Share of Total Production
1Texas1.7843.0%
2North Dakota0.4310.4%
3New Mexico0.379.2%
4Oklahoma0.174.1%
5Colorado0.164.0%

Rounding the top 10 are states like Alaska, California, Wyoming, Louisiana, and Utah.

Texas is undoubtedly the largest oil-producing state in the United States. In 2020, Texas produced a total of 1.78 billion barrels of oil. Texas is home to the most productive U.S. oil basin, the Permian, routinely accounting for at least 50% of total onshore production. A distant second is North Dakota, which produced about 431.2 million barrels of oil in 2020.

Regional Distribution of U.S. Oil Production

A total of 32 of the 50 U.S. states produce oil. They are divided among five regional divisions for oil production in the U.S., known as the Petroleum Administration for Defense Districts (PADD).

These five regional divisions of the allocation of fuels were established in the U.S. during the Second World War and are still used today for data collection purposes.

Given that Texas is the largest U.S. oil-producing state, PADD 3 (Gulf Coast) is also the largest oil-producing PADD. PADD 3 also includes the federal offshore region in the Gulf of Mexico. There are around 400 operational oil and gas rigs in the country.

Impact of U.S. Oil Production on Employment

Rapid growth in oil production using advanced drilling methods has created high-paying jobs in states like North Dakota and Texas.

Thanks to the rapid development in the Bakken Shale formation, North Dakota boasts the nation’s lowest unemployment rate. The state has also grown personal income and state economic output at a fast rate, due to oil and gas industry growth.

Oil production from the Eagle Ford Shale has transformed a relatively poor region of South Texas into one of the nation’s most significant economic development zones. In fact, due largely to the oil and natural gas industry, the Texas Comptroller estimates that Texas has recovered 100% of the jobs lost during the Great Recession.

Looking to the Future

The U.S. slashed its oil production forecast through next year just as OPEC and its allies begin to roll back their production cuts in the coming months.

U.S. oil output will drop to 11.04 million barrels a day this year, down from a forecasted 11.15 million. This was a result of the deep freeze that shut down the oil industry in Texas. The EIA also lowered its output forecast for 2022 by 100,000 barrels a day.

Despite its forecast for a rise in supply from outside the cartel this year, OPEC said in its report that it is uncertain about the levels of investment expected to determine the non-OPEC supply outlook for the years to come.

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