What Is Crude Oil Used For? Explaining the Importance

According to Forbes, crude oil accounts for approximately 33% of the world's energy consumption. Crude oil has a dominant role in energy production, underscoring its importance in fueling transportation, heating, and electricity generation across the globe.

Additionally, crude oil is a major focus in the trading world from stocks on oil-based companies to derivatives like contracts for difference (CFDs), where fluctuations in its price could signal broader economic trends.

» Learn more about opening an account with Fortrade

Importance of Crude Oil

Crude oil serves as the raw material for countless products that we rely on every day, from essential household goods to industrial components. By exploring the most common petroleum products, we could better understand the importance of crude oil in shaping our daily lives.

Common Petroleum Products

• Gasoline: This is the primary product of crude oil refining, and it’s essential for powering cars and other vehicles. It is one of the most widely used petroleum products, accounting for a significant portion of global oil consumption.

• Diesel fuel: Diesel fuel is another crucial product derived from crude oil. It is primarily used to power trucks, buses, and some cars.

• Jet fuel: Jet fuel, specifically kerosene-based, is used in aviation to power aircraft. It is crucial for both commercial and military aviation, supporting global travel and logistics.

• Heating oil: This product is used primarily in heating systems for homes and industrial buildings. It is particularly important in regions with harsh winters, providing a reliable heat source.

• Petrochemical feedstocks: Raw materials derived from crude oil used to produce a wide range of chemicals and plastics. Petrochemicals are foundational in manufacturing products like plastics, resins, and synthetic fibers.

» Curious about how crude oil impacts daily life? Learn the essentials of trading crude oil CFDs

Primary Uses of Crude Oil

Transportation Infrastructure

Crude oil powers transportation by providing fuel for vehicles, airplanes, and ships, while also supporting global trade and travel. Bitumen, a crude oil residue, is used for road construction, and derivatives like motor oil and lubricants reduce friction in engines, enhancing efficiency and longevity. Petrochemicals from crude oil are crucial for making synthetic rubber and other automotive components, boosting vehicle durability and performance.

Manufacturing

Many manufacturing processes depend on crude oil, either directly as a fuel source or indirectly through the use of petrochemicals. Industries such as plastics, chemicals, and textiles rely on oil-based products for production, driving economic activity and innovation.

Agriculture

The agricultural sector heavily utilizes diesel-powered machinery for planting, harvesting, and transportation. Additionally, petroleum-based chemicals, such as fertilizers and pesticides, are essential for modern farming practices, boosting productivity and ensuring food security.

» Want to learn how to invest in agricultural commodities? Discover key insights in our blog on trading agricultural commodities with CFDs

Industrial Uses of Crude Oil Derivatives

• Solvents: Crude oil derivatives like benzene and toluene are essential solvents in the chemical industry used to produce paints, adhesives, pharmaceuticals, plastics, resins, and synthetic fibers. They also serve as carriers for active ingredients and facilitate chemical reactions in various formulations.
• Fuel oils: Heavy fuel oils derived from crude oil are used in industrial furnaces and boilers, providing energy for factories and large-scale heating systems.
• Pharmaceuticals: The pharmaceutical industry extensively uses petrochemicals derived from crude oil to manufacture a wide range of products, including drugs, vitamins, and medical devices.
• Textiles and fashion: The textile industry utilizes petrochemical-derived fibers such as polyester, nylon, and acrylic. These synthetic fibers are widely used in clothing, carpets, and upholstery due to their durability, elasticity, and affordability.

» Learn more about trading key commodities like crude oil with our trading account options

Crude Oil: Ensuring Global Stability

Crude oil plays a crucial role in maintaining global economic stability due to its pivotal role in energy production and industrial processes. It affects the cost of goods and services, as oil prices influence transportation, manufacturing, and production costs. Price fluctuations in crude oil might lead to economic volatility, potentially impacting inflation rates and trade balances. Of course, the trading industry closely monitors oil markets, as changes in oil prices could signal broader economic trends and influence investment strategies across various sectors. 

» Ready to explore trading possibilities in the oil market? Learn more about opening an account with Fortrade