Crude oil is formed over millions of years by organic materials decomposing in a low oxygen, high pressure environment. Due to the time it takes for crude oil to form, it is considered a fossil fuel and its reserves finite. As an increasing number of conventional reserves such as underground reservoirs were depleted, unconventional means of oil extraction have become more viable. Through its exploration of shale oil and oil sands, the United States and Canada have become major oil producing countries, accounting for nearly one fourth of the world’s crude oil production. Nearly 4.5 billion metric tons of oil is produced worldwide every year, with the Middle East housing the greatest share of proved oil reserves, at close to 50 percent.
With oil serving such a great number of purposes, it is unsurprising that oil (and gas) companies are among the largest corporations worldwide. In 2019, Anglo-Dutch giant Royal Dutch Shell ranked fifth in a list of largest company in the world based on revenue. Six of the eleven most profitable companies are part of the oil and gas sector.
Oil consumption has been rising steadily over the last decade. The United States is the greatest oil consumer worldwide, guzzling some 19.4 million barrels every day. Correspondingly, the U.S. is also among the world’s leading oil importers, just behind Singapore.
However, the 2020 coronavirus pandemic has had great ramifications for the industry. With mobility restrictions in place across the world, reduced demand by the largest oil consuming sector has resulted in many oil benchmarks falling to their lowest ever levels in April of that year. Although initially recovering from said slump, oil prices such as OPEC’s reference basket still averaged only 41.47 U.S. dollars per barrel in 2020.