Oil is one of the most important commodities in the world. When transformed into petroleum, it is a key energy source used in vehicles, planes, heating, asphalt, and electricity. Outside of being a crucial energy source, petroleum is used in plastics, paints, chemicals, tape, and so much more. It's hard to imagine a world without oil.

Upstream, Midstream, and Downstream

The oil industry is broken down into three segments: upstream, midstream, and downstream. Upstream consists of the exploration and drilling to find oil and extract it from the earth. Midstream activities consist of transportation and storage, while downstream deals with the refining and marketing of the finished product. It is, of course, the upstream activity that is the most crucial. Because without the discovery and drilling of oil, all the rest would not exist.

The largest global producers of oil are the United States, Saudi Arabia, and Russia. These three countries produced approximately 40 million barrels of oil per day in 2020. That is 43% of total world production.

Exploration and Production

According to market research by IBISWorld, a leading business intelligence firm, the total revenues for the oil and gas drilling sector came to approximately $2.1 trillion in 2021. This sector is composed of companies that explore for, develop, and operate oil and gas fields. It is also sometimes referred to as the oil and gas exploration and production industry, or simply E&P.

The industry includes companies that specialize in crude petroleum production, the mining and extraction of oil from shale or sands and the recovery of hydrocarbon liquids. Some of the biggest oil and gas players are involved in the exploration and production of oil. Exxon, Chevron, and BP are three to name but a few.

The sector also includes all natural gas producers and those that recover sulfur from natural gas. It does not include companies that transport, refine, or market oil and natural gas. For those companies that perform all operations, also known as integrated oil companies, or supermajors or big oil, only the estimated revenues from included activities are counted toward the $2.1 trillion industry figure. As of May 2021 in the United States, there are about 570,000 people employed in mining, quarrying, and oil and gas extraction.

The Bottom Line

The global oil and gas exploration and production sector makes up a large portion of the global economy, and the growth of this industry is only expected to increase in the future. It is forecasted that OPEC crude oil production will average 32.11 million b/d in 2021 and 34.15 million b/d in 2022.

Emerging economies have driven recent demand for the production of oil and gas. This is particularly true in the extremely populous BRIC nations: Brazil, Russia, India, and China. The E&P industry looks to have a bright future on the back of this demand. Furthermore, there are plenty of oil reserves throughout the globe, though some of these reserves are difficult to reach. As technology improves in the future, these reserves will become more accessible, as was the case with shale fracking in the United States.

The nature of oil and gas exploration projects means that the industry relies much more heavily on capital equipment than human labor, so employment is not likely to rise as much as total market capitalization.