Energy Investor Monthly – January 2024

Crude Oil: One of the Essentials of Modern-Day Life

U.S. President Joe Biden recently paused all approvals for pending and future applications to export liquefied natural gas (LNG) in a move that was cheered by climate activists and that the current administration believes addresses “… the climate crisis for what it is: the existential threat of our time.” Therefore, we felt the timing was appropriate to discuss U.S. energy exports and the impact that many hydrocarbons, particularly crude oil, have on our daily lives.

Image Courtesy of International Association of Oil & Gas Producers

For most of us, when we think about crude oil, there’s probably one thing that immediately comes to mind – motor oil for your car or lawnmower. But there are many other uses for crude oil and natural gas than what meets the eye. The petrochemicals derived from oil and natural gas make the manufacturing of over 6,000 everyday products and high-tech devices that make modern-day life possible. Major petrochemicals like ethylene, propylene, acetylene, benzene, and toluene, just to name a few, are the basic building blocks that are used to produce many of the items we use and depend upon. In fact, modern-day life relies on the low cost and availability of these products, many of which are produced in the United States and exported across the globe. As we zero in on some of these common household and commercial products below, the list may surprise you!

Crude Oil

Starting with unrefined crude oil, crude contains a variety of valuable chemical precursors, which are commonly referred to in the industry as “petroleum products.” While most people are familiar with crude oils, popular distillate products produced through the refining process, such as gasoline, diesel, and jet fuel, there are a variety of other products we use each day that also come from crude oil. Just a few of these include lubricants, waxes, paving mediums, base materials for plastics, and even a few key items necessary to produce steel.


Lubricants are the basic substances that reduce friction, either directly between surfaces or by creating a fluid barrier between the surfaces. This barrier helps to transfer heat energy created by friction, flush away unwanted debris and contaminants, and protect the wearing surfaces of the moving parts. They can even create a seal for gases. Lubricants also protect metal surfaces from corrosion and rust by acting as a barrier to moisture. Petroleum-based lubricants, in particular, are superior at maintaining their properties in applications of intense heat and pressure. To illustrate, think about the typical truck or automobile. There are numerous moving parts, all of which are in contact with one another and moving at high speeds. This creates friction, which generates significant heat and pressure. To keep this vehicle running reliably and efficiently, a wide variety of lubricants are used throughout the engine, suspension, braking systems, and drive train. This is not limited to only internal combustion vehicles; even EVs need lubricants – many of which are highly specialized.


Waxes are hard yet malleable byproducts of crude oil production and refining processes. These substances can then be further refined and processed to make a variety of products, most commonly paraffin wax, petroleum jelly, and components of specialty lubricants. In fact, paraffin wax is found in many common products that are used in our everyday lives, including make-up, polishes, candles, food additives, sealants, art supplies (such as crayons and grease pencils), lubricants, and even electronics. Prior to the availability of petroleum products, most waxes were animal-based. Each had drawbacks, whether they were too greasy, such as tallow, or not in plentiful enough supply, such as beeswax, to be available for widespread use. However, because paraffin wax is plentiful and clean-burning, it has become the preferred wax for candle making.


Asphalt is a thick and viscous substance that is left over from the refining process. Also known as bitumen, this substance is mixed with other oils and materials as a binding agent to create durable water-resistant materials and surfaces, most commonly for driving surfaces like roads and driveways. Originally a waste product that refiners would give away, today, asphalt is in high demand and costs roughly $600 per ton. However, asphalt makes up roughly only 4% to 5% of the typical pavement mixture by weight, making it an extremely efficient additive material. You also may not know that asphalt is highly recyclable, and it is the most recycled product in North America (per the National Asphalt Pavement Association). Therefore, even if we eventually evolve into a 100% renewable economy, asphalt as a key component of pavement will still be necessary – EVs will still need roads and driveways!


One thing the world cannot do without is plastics, and the base materials for all plastics come from oil and its petroleum derivatives. Like asphalt, there are no natural alternatives to petroleum-based plastics, although unlike asphalt, natural gas liquids, or NGLs, can also be used as a source for these chemicals. Because of how important plastics have become to almost all aspects of modern life, including food safety and medical devices, it is impossible to overstate their importance. Out of all petroleum products, plastics are perhaps the most important and ones that our society cannot function without.


While not as obvious as a key component as the other products, petroleum coke, also known as “petcoke,” is an integral part of the steel-making process. This carbon-rich substance also serves a range of industrial and commercial purposes, including its utilization as a fuel source in power plants and cement kilns. The production of modern steel requires a rich source of carbon, which traditionally came from coal. However, petcoke is increasingly being used as a cleaner alternative to coking coal. This makes petroleum coke a much better alternative, both environmentally and economically, to produce the many grades of steel that do not require specialized and highly expensive metallurgical coal.

As talk of getting rid of oil increases in volume in the media, it is important to remind ourselves of all the useful and, dare we say, essential products that come from crude oil. Beyond its uses as a fuel for power, heating, cooking, and transportation, crude oil-based products have become an integral part of modern life. We hope both the environmentalists and the current administration are listening.



U.S. Total Crude Oil Production and U.S. Crude Rotary Rig Count (as of January 12, 2024):

  1. West Texas Intermediary (WTI) oil price was $72.68 per barrel (+1.3% m/m)
  2. U.S. oil production was 13.3mm bbl/d (Flat m/m)
  3. U.S. oil rig count was 499 (-0.4% m/m)
Source: Bloomberg, Dividend Assets Capital

The U.S. Commercial Crude Oil Inventories (excluding those in the Strategic Petroleum Reserve) and Inventory Changes (As of January 12, 2024):

  1. Inventory decreased by 13.8 million barrels month over month to 429.9 million barrels (5.2% below the 5 year average).
  2. Total crude stockpiles, including the Strategic Petroleum Reserve (“SPR”), decreased by 10.7 million barrels month over month to 785.5 million barrels.

U.S. Imports and Exports (as of January 12, 2024):

  1. U.S. crude oil 4-week average imports were 6.7 mm bbl/d, up 0.8% month over month.
  2. U.S. crude oil 4-week average exports were 4.4 mm bbl/d, up 3.4% month over month.
Source: Bloomberg, Dividend Assets Capital

U.S. Refinery Inputs and Utilization Rates (as of January 12, 2024):

  1. U.S. crude oil refinery inputs averaged 16.7 mm bbl/d for the week January 12, 2024. Four-week inputs averaged 16.6 million bbl/d, 1.0% higher than the same time a year ago.
  2. Refinery Utilization Rate was 92.6%, up from 92.4% for the previous month. This is higher than the same period last year, which was an 85.3% utilization rate
Source: Bloomberg, Dividend Assets Capital

This information is for illustrative purposes. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.

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