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 FAQS
  1. If oil producers run out of room to store oil, will the price of gasoline plummet?

    The price of gasoline would plummet if oil producers run out of room to store oil. However, running out of room to store ... Read Full Answer >>
  2. What product categories make up the chemicals sector?

    The chemicals sector is one of the largest industry sectors in the world, covering five major subsectors that impact manufacturing, ... Read Full Answer >>
  3. How does the law of supply and demand affect the oil industry?

    The law of supply and demand primarily affects the oil industry by determining the price of oil. The price, and expectations ... Read Full Answer >>
  4. What other sectors are most similar to metals and mining?

    The metals and mining sector has related industries that utilize minerals in production and investment. These industries ... Read Full Answer >>
  5. What companies are positioned to grow from the popularity of ETFs?

    Some of the companies best-positioned to benefit from the explosion in the popularity of exchange-traded funds (ETFs) are ... Read Full Answer >>
  6. What percentage of the global economy is comprised of the oil & gas drilling sector?

    According to market research by IBISWorld, a leading business intelligence firm, the total revenues for the oil and gas drilling ... Read Full Answer >>
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

    Oil vs. Gas ETFs: Which One Should I Choose?

    When it comes to oil versus gas ETFs, why not choose one that gives exposure to both?
  7. Stock Analysis

    Top 6 Gas Stocks that Pay Regular Dividends

    A look at the top 6 dividend paying gas stocks.
  8. Investing

    Top Oil Stocks that Pay Regular Dividends

    Eyeing oil stocks that pay regular dividends? Consider these refinery plays.
  9. Mutual Funds & ETFs

    The UNG Natural Gas ETF: Best Bet or Stay Clear?

    UNG is a popular natural gas ETF, but if you're going to get involved, then you need to know the risks.
  10. Options & Futures

    How Long Can Gas Stay Cheap?

    The current gas prices means a lot for the economy and our pockets. Let's explore how long we can expect gas prices to be low, what affects gas prices, and what changes might be in store.

You May Also Like

Hot Definitions
  1. Fisher Effect

    An economic theory proposed by economist Irving Fisher that describes the relationship between inflation and both real and ...
  2. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  3. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  4. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  5. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  6. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center