The oil and gas industry is the global network of companies that find, extract, transport, refine, and sell petroleum and natural gas products. It supplies roughly 53% of the world’s total energy, with oil accounting for about 30% and natural gas another 23%. The industry touches nearly every part of modern life, from the gasoline in your car to the plastics in your phone case.
The Three Sectors: Upstream, Midstream, and Downstream
The industry is organized into three broad sectors that follow the journey of oil and gas from underground deposits to finished products on store shelves.
Upstream companies handle exploration and production. They identify promising geological formations, drill wells, and extract crude oil and natural gas from below the surface. This includes everything from feasibility studies and seismic imaging to operating drilling rigs. Upstream is where the raw material enters the supply chain.
Midstream companies move and store those raw materials. They operate the pipelines, tanker ships, railcars, and storage facilities that connect production sites to refineries. Crude oil travels primarily through pipelines and ocean tankers, while natural gas moves almost entirely through pipeline networks. Midstream is the connective tissue of the industry.
Downstream companies turn crude oil and natural gas into products consumers actually use. This sector includes oil refineries, petrochemical plants, natural gas distributors, and retail fuel stations. If you’ve ever filled up at a gas station, you were the final link in the downstream chain.
How Oil and Gas Are Found and Extracted
Early explorers relied on visible clues like natural oil seeps at the surface. Modern exploration uses geological surveys, subsoil testing for onshore sites, and seismic imaging for offshore locations. Seismic imaging works by sending sound waves into the earth and analyzing the echoes to map rock formations thousands of feet below.
Onshore drilling groups wells together in a field. Spacing varies widely: heavy crude oil wells may sit just half an acre apart, while natural gas wells can be spaced 80 acres apart. Offshore drilling uses platforms that are either fixed to the ocean floor or floating structures secured with anchors. Hydraulic fracturing, commonly called fracking, uses high-pressure liquid to crack open rock formations and release oil or gas that would otherwise be trapped.
What Happens at a Refinery
Refineries convert crude oil into usable products through three basic steps: separation, conversion, and treatment. The process starts by heating crude oil in furnaces and piping the resulting liquids and vapors into tall distillation towers. Inside these towers, different components separate based on their boiling points. The lightest materials, like gasoline vapors, rise to the top and condense. Medium-weight liquids such as kerosene and diesel settle in the middle. The heaviest fractions, including asphalt, collect at the bottom.
A single 42-gallon barrel of crude oil produces a surprising variety of products. Based on 2023 U.S. refinery data from the Energy Information Administration, one barrel yields roughly 19.6 gallons of gasoline, 12.5 gallons of diesel and heating oil, 4.4 gallons of jet fuel, and smaller amounts of petroleum coke, asphalt, lubricants, waxes, and chemical feedstocks used to make plastics. Refineries actually produce slightly more than 42 gallons of finished products per barrel of input because some processes increase the volume of the output.
Who Controls the Industry
Two types of companies dominate the oil and gas landscape. National oil companies (NOCs) are owned or controlled by governments and were originally created to give nations direct control over their hydrocarbon reserves and generate government revenue. NOCs now control over 85% of global oil reserves and much of the world’s oil and gas infrastructure. The three largest, Saudi Aramco, Gazprom, and the National Iranian Oil Company, together produce more than 25% of global hydrocarbon output.
International oil companies (IOCs) are publicly traded corporations that operate across borders. The largest by production volume include ExxonMobil, BP, and Shell. While IOCs are household names in many countries, they control a relatively small share of global reserves compared to the NOCs. The balance of power has shifted steadily toward state-owned companies over the past few decades.
How Oil Prices Work
There is no single “oil price.” Crude oil is priced against benchmark grades that reflect different qualities and geographic markets. Three benchmarks serve as the global reference points.
- Brent Crude is derived from North Sea oil fields and is the most widely used global benchmark. It generally reflects light, sweet crude and is the standard for waterborne oil pricing across the Atlantic Basin.
- West Texas Intermediate (WTI) is the North American benchmark, priced at a major storage hub in Cushing, Oklahoma. It represents light, sweet crude produced primarily in the United States.
- Dubai/Oman reflects medium-weight, higher-sulfur crude exported from the Middle East and priced primarily for Asian markets.
“Light” and “sweet” describe crude that flows easily and contains less sulfur, making it cheaper to refine. Heavier, more sulfur-rich crudes trade at a discount because they require more processing. Prices for all three benchmarks fluctuate based on supply, demand, geopolitics, and trading activity on futures markets.
Environmental Footprint
The production, transport, and processing of oil and gas generated 5.1 billion tonnes of greenhouse gas emissions in 2022, according to the International Energy Agency. That figure represents about 15% of total energy-related emissions globally, and it covers only the industry’s own operations. It does not include the emissions released when consumers burn gasoline, diesel, or natural gas, which are substantially larger.
The industry’s environmental impact extends beyond carbon dioxide. Drilling operations can affect local water supplies, pipeline leaks pose risks to soil and waterways, and flaring (burning off excess natural gas at production sites) wastes energy while adding to air pollution. These concerns have driven increasingly strict regulations in many countries and growing investment in emissions-reduction technology within the industry itself.
The Industry’s Shifting Future
Oil and gas still supply more than half the world’s energy, but the long-term trajectory is changing. Under the IEA’s net zero by 2050 scenario, oil demand would fall by 75%, dropping from around 90 million barrels per day in 2020 to 24 million barrels per day by 2050. Natural gas demand would decline by 55%. Fossil fuels overall would shrink from nearly four-fifths of total energy supply to just over one-fifth.
Whether that scenario plays out depends on the pace of renewable energy adoption, government policy, and technological development. In the meantime, the industry continues to invest billions in both traditional production and lower-carbon technologies. Many of the largest oil companies have diversified into natural gas (which produces fewer emissions when burned), hydrogen, and carbon capture projects, hedging against a future where demand for their core products declines significantly.