Hydrocarbon

AAA

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).

RELATED TERMS
  1. Crude Oil

    A naturally occurring, unrefined petroleum product composed of ...
  2. Oil Sands

    Sand and rock material which contains crude bitumen (a heavy, ...
  3. Oil ETF

    A category of exchange-traded funds that invest in companies ...
  4. Control Of Well Insurance

    Insurance that provides coverage to companies operating a well ...
  5. 1979 energy crisis

    The 1979 energy crisis in the U.S. was an event of widespread ...
  6. Benchmark Crude Oil

    Benchmark crude oil is crude oil that serves as a pricing reference, ...
Related Articles
  1. Mutual Funds & ETFs

    Investing In Oil And Gas UITs

    Unit investment trusts provide direct exposure to the energy sector, fueling better returns.
  2. Fundamental Analysis

    A Natural Gas Primer

    Learn why natural gas is playing a larger role in the energy industry.
  3. Investing

    5 Common Trading Multiples Used In Oil And Gas Valuation

    Before you decide to invest in oil and gas, you should understand these multiples.
  4. Forex Education

    Natural Gas Industry: An Investment Guide

    Investors looking into this industry are faced with a confusing amount of information. We explain the important concepts and terms.
  5. Active Trading

    How Does Crude Oil Affect Gas Prices?

    Find out how this commodity's fluctuating price affects more than just how much you pay at the pump.
  6. Mutual Funds & ETFs

    Want to Go Long Natural Gas? Eye the UGAZ ETN

    Is UGAZ the best way to play natural gas? Maybe not.
  7. Options & Futures

    Do Oil and Natural Gas Prices Rise And Fall Together?

    Do the prices of crude oil and natural gas affect each other? Investopedia explores price patterns and provides analysis.
  8. Economics

    Asian LNG Prices: Not Likely To Rise Anytime Soon

    Asian LNG prices could stay low for an extended period of time, due to low oil prices, less demand and new LNG-producing projects on various continents.
  9. Stock Analysis

    Can Eagle Rock Energy Partners Soar In 2015?

    Eagle Rock Energy has seen its prices drop, but there is a ray of hope that could send units higher in 2015 even if the price of oil doesn’t rally.
  10. Charts & Patterns

    Are These the 10 Best Energy Stocks of 2015?

    These energy stocks are a bit more speculative than you might expect, but their long-term upside potentials are high.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center