Liquid petroleum pumped from oil wells is known as "crude oil." At the molecular level, crude oil is composed predominantly of carbon, which can make up as much of 87% of the material. Hydrogen is another major component that makes up as much as 15% of crude oil. Other components that are found in crude in varying amounts include oxygen, sulfur, nitrogen, and helium.
Crude Oil Classifications
The petroleum industry often names crude oil based on its geographical source. For example, “West Texas Intermediate.” Crude oil is also classified based on physical characteristics and chemical composition, and these qualities are described with terms such as “sweet,” “sour,” “light,” and “heavy.” Crude oil varies in price, usefulness, and environmental impact.
"Sweet" vs. "Sour" Crude Oil
Crude oil with low sulfur content is classified as “sweet.” Crude oil with a higher sulfur content is classified as “sour.” Sulfur content is considered an undesirable characteristic for both processing and end-product quality. Therefore, sweet crude is typically more desirable and valuable than sour crude. West Texas Intermediate (WTI) crude oil is a good example of sweet crude oil, while oil from Canada and the U.S. Gulf Coast tends to be sour.
"Light" vs. "Heavy" Crude Oil
Crude oil's classification as either “light” or “heavy” depends on the oil’s relative density, based on the American Petroleum Institute (API) gravity. This measurement reflects how light or heavy a crude oil is compared to water. If an oil’s API gravity is greater than 10 (the gravity of water), it is lighter than water and will float on it. If an oil’s API gravity is less than 10, it is heavier than water and will sink. For context, West Texas Intermediate (WTI) crude oil has an API gravity of 40, which is considered light, while Alaska Heavy crude oil has an API gravity of 8 to 14, which is considered heavy.
The API gravity of crude oil can vary greatly, from 10 to 50. Most crude oil falls into the range of 20 to 45.
Lighter crude is less expensive to produce. It has a higher percentage of light hydrocarbons that can be recovered with simple distillation at a refinery.
Heavy crude can’t be produced, transported, and refined by conventional methods because it has high concentrations of sulfur and several metals, particularly nickel and vanadium. Heavy crude has density approaching, or even exceeding, that of water. Heavy crude oil is also known as “tar sands” because of its high bitumen content.
With simple distillation, heavier crude oil produces more lower-valued products, compared to the simple distillation of light crude. Heavy crude oil requires extra refining to produce more valuable and in-demand products.
How Distillation Impacts Price
Crude oil's value comes from its ability to be refined and turned into products ranging from asphalt and gasoline to lighter fluid and natural gas—along with a variety of essential elements such as sulfur and nitrogen. Petroleum products are also key components in the manufacturing of medicines, chemicals, and plastics.
These products are all produced through processing or refining, and the less processing necessary, the more valuable the crude becomes.
When one type of crude oil is cheaper than another crude oil, that's often because it will take more work to create a desirable product out of the cheaper crude.
Simple distillation—or first-level refinement—of different crude oils produces different results. For example, the U.S. benchmark crude oil, West Texas Intermediate (WTI), has a relatively high natural yield of desirable end-products, including gasoline. The processing of WTI also yields about one-third “residuum,” a residual by-product that must be either reprocessed or sold at a discount. In contrast, the simple distillation of Saudi Arabia's Arabian Light, the historical benchmark crude, yields almost half "residuum." This difference gives WTI a higher premium.
The lighter the oil, the more of the desirable products it produces through distillation at a range of temperatures. The lowest distillation temperatures produce products such as liquid petroleum gases (LPG), naphtha, and so-called "straight run" gasoline. In the middle range of distillation temperatures, the refinery produces jet fuel, home heating oil, and diesel fuel.
At the highest distillation temperatures—over 1,000 degrees Fahrenheit—the heaviest products are produced, including residuum or residual fuel oil, which can be used for lubricants. To maximize the output of more desirable products, refineries commonly reprocess the heaviest products into lighter products.
4 Classifications of Crude Oil Toxicity
Toxicity refers to how harmful an oil might be to humans, other living organisms, and the environment.
Generally speaking, the lighter the oil, the easier it will spread around and permeate through surfaces, making it potentially more toxic for the environment.
Because of the constant potential of spills, the Environmental Protection Agency (EPA) has classified crude oil in four categories that reflect how the oil would behave in spills and its aftermath.
Class A: Light, Volatile Oils
Because they are light and highly liquid, these clear and volatile oils can spread quickly on impervious surfaces and in water. Their odor is strong, and they evaporate quickly, emitting volatiles. Usually flammable, these oils also penetrate porous surfaces, such as dirt and sand, and may remain in areas into which they seep. Humans, fish, and other forms of plant and animal life face the danger of toxicity from Class A oils.
Class B: Non-Sticky Oils
Considered less toxic than Class A, these oils are generally non-sticky but feel waxy or oily instead. The warmer they get, the more likely Class B oils soak into surfaces—making them potentially hard to remove. When volatile components of Class B oils evaporate, the result can be a Class C or D residue. Class B includes medium to heavy oils.
Class C: Heavy, Sticky Oils
These heavy, tarry oils, which include residual fuel oils and medium to heavy crudes, are slow to seep into porous solids and are not highly toxic. However, Class C oils are difficult to flush away. They also sink in water, adding the potential of smothering or drowning wildlife.
Class D: Non-Fluid Oils
Non-fluid, thick oils are comparatively non-toxic and don’t seep into porous surfaces. Mostly black or dark brown, Class D oils tend to dissolve and cover surfaces when they get hot, which makes them very hard to clean up. Heavy crude oils, such as the bitumen found in tar sands, fall into this class.
The Bottom Line
Knowing the crude oil classifications may help you better understand the oil industry and its impact on the economy and environment. Investors may also better understand what they're buying when investing in crude oil stocks or ETFs.