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.

BREAKING DOWN '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).