Hydrocarbon

Definition of 'Hydrocarbon'


An organic chemical compound composed exclusively of hydrogen and carbon atoms. Hydrocarbons can be solids, liquids or gasses and are what petroleum and natural gas are primarily made of. The way the hydrogen and carbon atoms are arranged and the types of chemical bonds that connect them determine what product they create. Butane, methane, ethylene and benzene are all hydrocarbons. Crude oil, tar, bitumen and condensate are all petroleum hydrocarbons.

Investopedia explains 'Hydrocarbon'


A basic understanding of hydrocarbons and how they are extracted and processed will help if you want to invest in oil and natural gas stocks. It will be easier to understand the companies’ financials and make sense of news and analysis related to oil and natural gas companies.

Hydrocarbons form naturally from plant and animal remains that are compressed through temperature and pressure over millennia, deep within the earth, in porous rocks like sandstone, limestone and shale. These types of rock exist in large bodies of water, especially oceans, and the natural gas and petroleum gradually rise through the rock and closer to the water’s surface (but still thousands of feet deep) and form a reservoir. Oil and natural gas exploration companies can drill wells into these reservoirs and extract these hydrocarbons, which are then turned into fuels, explosives, plastics, rubber, chemicals, lubricants, solvents and fibers that consumers can use.

Different techniques are used to extract hydrocarbons depending on their type and the material they’re contained in. For example, hydraulic fracturing (“fracking”) is used to extract natural gas from shale by cracking the rock and using pressurized liquid to force the gas up through a well to the earth’s surface.

Hydrocarbon combustion in the presence of sufficient oxygen produces carbon dioxide, water and heat, which is why hydrocarbons are desirable as fuels. Methane, the main component of natural gas, is the simplest hydrocarbon because of the way it is structured. The four classes of hydrocarbons are aromatics, alkanes, alkenes (olefins) and alkynes (acetylenes).



comments powered by Disqus
Hot Definitions
  1. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  2. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  3. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  4. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  5. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  6. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
Trading Center