Bitumen: Crude Oil Byproduct, Examples, and Uses

What Is Bitumen?

The term bitumen refers to a substance produced through the distillation of crude oil. Bitumen is known for its waterproofing and adhesive properties and is commonly used in the construction industry, notably for roads and highways. Production occurs through distillation, which removes lighter crude oil components like gasoline and diesel, leaving the heavier bitumen behind. Deposits can also occur naturally at the bottom of ancient lakes, where prehistoric organisms have decayed and been subjected to heat and pressure.

Key Takeaways

  • Bitumen is produced through the distillation of crude oil and also occurs naturally.
  • Bitumen is known for its waterproofing and adhesive properties.
  • It is composed of complex hydrocarbons and contains elements like calcium, iron, sulfur, and hydrogen.
  • Bitumen prices are determined by the state of the global economy and the supply and demand for crude oil.
  • The world's first bitumen futures contracts debuted on the Shanghai Futures Exchange in October 2013.

Understanding Bitumen

Bitumen is a byproduct of crude oil. it is composed of complex hydrocarbons and contains elements like calcium, iron, sulfur, and oxygen. The quality of material and ease of production depends on the source and type of crude oil from which it is derived. It was first used for its natural adhesive and waterproofing characteristics, helping to bind building materials together, as well as to line ship bottoms.

Bitumen can deform permanently under heavy loads. Continued stress on the material can result in cracking. It oxidizes, which can leave the asphalt brittle. The way its shape is affected depends on a few things, including the composition of the asphalt mixture and the ambient temperature.

As noted above, bitumen isn't just produced by distilling crude oil, it's also a naturally-occurring product. The term is also used to refer to oil sands or partially consolidated sandstone containing a naturally occurring mixture of sand, clay, and water that is saturated with a dense and extremely viscous form of petroleum.

Bitumen Uses

The product has several modern uses. It's generally meant for industrial use and is commonly found in road paving. The majority of U.S. roads are made of either bitumen or a combination of bitumen and aggregates, such as concrete.

Another key use for bitumen is waterproofing. For instance, it was commonly used to waterproof boats and other marine vessels, as well as the sides of buildings. It was used in ancient times as mortar in building construction.

Along with being used as a waterproofing agent and acting as an adhesive, engineers who replace asphalt roads can reuse the material for other road projects. Bitumen is also commonly used by companies that create and manufacture roofing products. 

Another early use of bitumen was in photography and medicine. When bitumen was applied to plates and exposed to light, early photographers were able to produce static black and white images. This process, though, was long and drawn out. And some cultures—notably Persian—used bitumen to treat certain illnesses, such as gastrointestinal and bone disorders.

Ancient civilizations traded the material and Herodotus, a fifth-century BC Greek historian, claimed that the walls of ancient Babylon contained bitumen.

Bitumen Prices

Bitumen is a residual material during the process of refining crude oil into liquefied petroleum gas and gasoline. As such, bitumen prices are heavily dependent on the same set of factors that affect the price of crude. These include supply and demand and geopolitical stability in crude-producing regions of the world.

One additional factor that influences bitumen prices is the price spread between heavy and light crude. Bitumen is produced as a byproduct during the distillation process for heavy crude. As such, refiner decisions to process heavy versus light crude plays are critical for bitumen prices.

The U.S. government is the largest customer for asphalt produced in the country. Not surprisingly, that means economic conditions have a spillover effect on bitumen prices. For example, higher demand for asphalt for roads during an economic boom can result in increased prices. China also plays an important role in determining demand and setting prices for bitumen in recent times because of its heavy investment in scaling its road infrastructure.

Bitumen Futures

The world's first bitumen futures contracts debuted on the Shanghai Futures Exchange in October 2013. It was aimed at operators of refineries for crude oil, dealers in bitumen, and end-users of the product. In addition to Chinese entities, bitumen futures trading was restricted to foreign banks, which means foreign investors can't trade the commodity.

The futures contract is monthly, priced in yuan, and entails the physical delivery of 10 metric tons of bitumen per lot upon expiration. The final product for delivery has to be certified by the exchange and should adhere to quality specifications described in the Bitumen Futures Delivery Rules.

Bitumen Deposits

Naturally-occurring bitumen can be found in the world's oil sands deposits. Canada has the largest supplies in the world, especially in the province of Alberta. Rising oil prices in Canada made it economical to extract petroleum on a large scale. The Canadian Energy Research Institute, which is an independent charitable organization, estimates that the price of crude oil must hit $70.08 per barrel for a stand-alone bitumen mine to be profitable.

Other deposits of bituminous sands can be found in the United States, Venezuela, and Russia. Venezuela's deposits, produced by state-owned Petróleos de Venezuela S.A., have been known to exceed 230 billion barrels. Russia's bitumen supply is thought to be concentrated in Siberia and the Volga-Urals region. Kazakhstan is also another key region for bitumen supplies.

Although commonly confused with asphalt, bitumen is a totally different substance.

Bitumen vs. Asphalt

Bitumen may often be confused with asphalt. That's because both are commonly used in the construction industry. But there is a distinct difference between the two. As noted above, bitumen is a byproduct of crude oil that is used to bind asphalt together when used for projects, such as paving roads or roofing. It is used for its adhesive properties and because it resists damage from oil and water.

Asphalt, on the other hand, is a manmade substance. It is produced using the residue from petroleum distillate or from byproducts of natural deposits. It is heated, dried, and mixed together with bitumen and sand. Asphalt is then applied using machinery. The thickness of the asphalt depends on the purpose of the project. For instance, asphalt used for roads may be thicker than when it's used in shingles.

How Is Bitumen Made?

Bitumen is a byproduct of crude oil. It is commonly produced through a refining process in which crude oil is reduced. It removes lighter crude oil components and leaves behind the heavier bitumen. This product has many industrial applications. It is used in the construction of roads, where it is known as asphalt, and in roofing. Bitumen also occurs naturally and can be found in Canada's oil sands.

What Is the Primary Use of Bitumen?

Bitumen is primarily used for industrial purposes. It can be found in the construction industry where it is used to make roads, which is why it is commonly called asphalt in this application. It also has waterproofing and adhesive properties, which makes it a good product for roofing.

How Do I Invest in Bitumen?

Bitumen futures are available for trade through the Shanghai Futures Exchange. They were first offered in 2013 and were meant for crude oil refinery operators, bitumen dealers, and end-users. Like other trading activities, China restricted bitumen trading to domestic entities and foreign banks. But you can invest in bitumen indirectly through companies that refine crude oil and produce the product.

The Bottom Line

When people hear the word bitumen, they may often think of the roads on which they drive. While that isn't exactly untrue, it is often confused with another construction substance: asphalt. While asphalt is a manmade material that is used to pave roads, bitumen is a byproduct of crude oil that is used for its waterproofing and adhesive properties. As such, it is used to bind asphalt together during road construction and in roofing applications. Much of the world's supplies of bitumen come from Canada's Tar Sands.

Article Sources
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