The Energy Illusion
Another investigation into energy systems.
Undercurrent · Deep Dive · Energy & Geopolitics · Part IV
The World
Runs on Oil
You used oil today — not just in your car, but in your toothpaste, your phone case, your food packaging, the road you walked on, and the fertiliser that grew your breakfast. Oil isn't just energy. It's the invisible substrate of modern civilisation.
EnergyGeopoliticsEconomicsAviationIndustry
100M
Barrels consumed
globally every day
25%
Of oil demand
EVs could displace
48×
Energy density
jet fuel vs battery
4bn
People fed by
oil-based fertiliser
Even if every car on earth went electric tomorrow — every single one, overnight — global oil demand would fall by roughly 25%. The other 75% has no substitute.
The conversation about oil has been almost entirely about the 25%.
01
The Hook
You Think This Is About Petrol. It Isn't.
Oil is a feedstock. When a barrel of crude oil enters a refinery, it comes out as petrol, diesel, jet fuel, kerosene, heavy fuel oil, asphalt, lubricating oil, naphtha, and a stream of petrochemical feedstocks that become plastics, synthetic fibres, pharmaceuticals, fertilisers, detergents, and hundreds of other products.
You cannot make one of these without making all the others. The refinery does not choose what to produce. It separates what is already there.
02
Context — The Physics
What Crude Oil Actually Is
Crude oil is a complex mixture of thousands of different hydrocarbon molecules. The two most important variables are density and sulphur content.
| Benchmark | API Gravity | Sulphur | Classification | Character |
|---|---|---|---|---|
| Brent | 38° | 0.37% | Light sweet | Global benchmark, easy to refine |
| WTI | 39.6° | 0.24% | Light sweet | US benchmark, slightly lighter |
| Dubai/Oman | 31° | 2.0% | Medium sour | Middle East benchmark |
| Orinoco | ~8° | >5% | Extra heavy sour | Barely flows, must be diluted |
These are not interchangeable commodities. A refinery optimised for light sweet crude cannot simply switch to heavy sour crude.
Beyond Google
The fractional distillation column is the central mechanism of oil refining. Crude oil is heated to around 600°C and fed into the bottom of a tall column. Different hydrocarbon fractions condense at different temperatures. The column runs continuously, producing all products simultaneously.
What Comes Out of One Barrel
A standard 42-gallon barrel yields approximately 45 gallons of refined products
Petrol
42.7%
Diesel
25.4%
Jet Fuel
9.2%
Heavy Fuel Oil
4.2%
LPG
4.9%
Asphalt
3.1%
Petrochemicals
6.5%
Other
4%
Petrol accounts for 42.7%. The remaining 57.3% has no scalable substitute.
03
Context — The Three Fuels
Petrol, Diesel, and Jet Fuel:
Why Each One Is Irreplaceable
Petrol — Spark Ignition
Octane rating measures the fuel's resistance to premature ignition — 'engine knock.' Premium 95-octane petrol is not more powerful than regular 91-octane; it is more stable under pressure.
Diesel — Compression Ignition
A diesel engine compresses only air to roughly 20:1 until the air temperature rises to 700–900°C. Best diesel engines achieve efficiencies above 50%, compared to 35–40% for petrol. This is why the global freight system runs on diesel.
Jet Fuel — Kerosene-Type (Jet A-1)
Three properties: freezing point of −47°C, flash point of 38°C (far less volatile than petrol), and energy density of 43.15 MJ/kg — enormous energy relative to weight.
04
The Battery Problem
Why You Cannot Electrify a Jumbo Jet
Jet Fuel Energy Density
43.15
MJ per kilogram
Best Li-Ion Battery
0.9
MJ per kilogram
A Boeing 787-8 carries approximately 102 tonnes of jet fuel on a London–New York flight. The battery equivalent would weigh approximately 4,892 tonnes. The aircraft itself weighs 228 tonnes.
Aircraft
228t
228t
Fuel
102t
102t
Battery eq.
4,892t
4,892t
This is not an engineering problem waiting to be solved. It is a constraint of physics.
05
Context — The Military Dimension
Oil as a Strategic Weapon
The US Department of Defense is the single largest institutional consumer of petroleum on earth, burning through more than 100 million barrels per year.
21 million barrels of oil pass through the Strait of Hormuz every day — 21% of global oil trade, through a waterway 33 miles wide at its narrowest point.
Beyond Google
In 2019, Iran-backed attacks on oil tankers caused insurance premiums for vessels transiting the strait to increase by 10–15 times overnight. If supply actually stopped — even for two weeks — the IEA estimates that global spare capacity could not compensate.
06
The Mechanism
How the Oil Price Is Actually Set
The oil price is not set by supply and demand. It is set by what traders think supply and demand will be.
On 20 April 2020, the WTI futures contract traded at negative $37 per barrel — the first time in history.
| Benchmark | Region | Character | Key Feature |
|---|---|---|---|
| Brent | Europe, Africa, Middle East | Light sweet (38° API) | ~66% of global trade |
| WTI | Americas | Light sweet (39.6° API) | Landlocked at Cushing, OK |
| Dubai/Oman | Asia-Pacific | Medium sour | Middle East marker |
OPEC+ functions as a cartel setting production quotas. Saudi Arabia is the only member with sufficient spare capacity to act as a genuine swing producer.
07
So What — The Airline Game
How Airlines Gamble on Oil — and Sometimes Lose Everything
Fuel is typically 25–35% of total airline expenses. In 2019, the global fuel bill was $188 billion.
Southwest Airlines saved an estimated $3.5 billion between 1999 and mid-2008 through hedging.
But hedging is a bet, not insurance. When oil crashed in 2014, airlines locked into high-price hedges paid above-market rates.
Beyond Google
Tankering — carrying extra fuel from a cheap airport — increases fuel burn by approximately 8%. If the price differential exceeds 8%, it's profitable. The environmental implication: tankering increases carbon emissions on every flight.
The SAF Problem
Sustainable Aviation Fuel costs 3–5 times more than conventional Jet A-1. It represents less than 0.1% of total aviation fuel consumption.
08
So What — Peak Oil
Oil Is Not Running Out.
The Problem Is the Opposite.
The world's proven oil reserves have grown, not shrunk, over the past fifty years. The real constraint is not quantity but cost of extraction.
The Energy Transition Paradox
You need oil to build the infrastructure that replaces oil. Wind turbine blades are made from fibreglass composites — petrochemical products. Solar panel manufacturing uses petrochemical inputs. Electric vehicles contain approximately 150 kg of plastics and synthetic rubber.
A rapid, forced reduction in oil supply would not accelerate the energy transition. It would slow it down.
09
So What — Oil in Your Life
Everything You Own
That Is Made of Oil
Toothpaste
Glycerine & artificial flavourings from petrochemical feedstocks
Aspirin
Synthesised from salicylic acid, derived from petrochemical benzene
Polyester Clothing
Polyethylene terephthalate (PET) made from crude oil derivatives
Phone Case
Polycarbonate or ABS plastic, both petroleum-derived
Road Surface
Bitumen (asphalt) — the heaviest fraction of crude oil distillation
Household Paint
Alkyd resins and pigment carriers are petrochemical derivatives
Food Packaging
Polyethylene, polypropylene, and PET film — all crude oil derivatives
Fertiliser
Haber-Bosch process uses natural gas — feeds roughly 4 billion people
Lipstick
Petroleum jelly (petrolatum) is a primary base ingredient
Contact Lenses
Silicone hydrogel, a petroleum-derived polymer
Car Tyres
~40% synthetic rubber (styrene-butadiene), a petrochemical product
Detergent
Surfactants in washing-up liquid are petroleum-derived
One Takeaway
The conversation about replacing oil has been almost entirely about cars. Cars account for roughly 25% of oil demand. The other 75% has no scalable substitute. The energy transition is not a problem of replacing one fuel with another. It is a problem of replacing the molecular substrate of industrial civilisation.
The Dinner Party Line
"A battery with enough energy to fly a 787 from London to New York would weigh more than 21 times the aircraft itself. That's not an engineering problem — it's a law of chemistry. And even if every car on earth went electric tomorrow, oil demand would only fall by 25%."