Charlie Munger

Crude Oil vs Petroleum

What is crude oil?

Crude oil is an organic liquid substance often
found below the Earth’s surface. It is made up
of thousands of molecules composed of different
hydrogen and carbon atoms. Such compounds are
called hydrocarbons.

These hydrocarbons also contain
different proportions of impurities like
oxygen, sulphur, nitrogen and heavy
metal atoms.


The word ‘petroleum’ is derived from the Latin petra (which means
rock) and oleum (which means oil). It is commonly used to refer to
crude oil, but it may also refer to other related hydrocarbons.

Some hydrocarbons are gaseous, rather than liquid. Methane
is the most common example of these hydrocarbon gases.
This is the kind of natural gas that we most often use
in our kitchens at home.

Crude oil is highly flammable and
is an excellent source of energy. Its ‘sister’
hydrocarbon, natural gas, is another source
of energy. Oil is called a non-renewable
energy source because it cannot be

Petroleum deposits are
often found in natural underground
reservoirs called oil fields. The oil in these
fields can then be extracted by
drilling and pumping.

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