Oil, gas and coal: how they form, are found, moved and priced

By the end you will be able to

• Explain how oil, gas and coal formed and why commercial deposits need source rock, a reservoir and a trap
• Describe how oil and gas are found, produced, shipped, piped and refined, with the energy lost at each step
• Distinguish resources from reserves and judge claims about peak oil and the reserve-to-production ratio
• Analyse why oil and gas prices move so sharply, using the shocks of the 1970s and the 2026 Hormuz disruption
• Compare natural gas, LNG and coal on emissions, uses and outlook, with 2024-2026 data

Contents

1. Part 1 How fossil fuels form

   Every barrel of oil, cubic metre of gas and tonne of coal began as living matter that captured sunlight. What turned a small part of that matter into fuel was burial without oxygen, heat and pressure over millions of years, and then a geological accident that trapped it where people could reach it.

   • Crude oil is a varied mixture of hydrocarbons, graded by density and sulfur
   • Oil and gas were cooked from plankton in a narrow temperature window
   • Coal comes from land plants, and its rank sets its value
2. Part 2 Finding and producing oil and gas

   Finding oil has moved from following surface seeps to processing three-dimensional sound images of rock kilometres down. Producing it has moved from shallow vertical wells to horizontal bores under deep ocean and through tight shale. Yet even with all this technology, most of the oil in a reservoir stays in the ground.

   • Seismic surveys and rotary drilling turned exploration into engineering
   • Most oil stays in the reservoir, and a few giant fields dominate
   • Shale combined two old techniques and remade American supply
3. Part 3 Moving and refining oil

   Oil's value lies not just in its energy but in how cheaply it can be moved and how flexibly it can be refined. Tankers, pipelines and refineries together form the largest industrial system in the world, with a few narrow sea lanes as its weak points.

   • Tankers and pipelines make oil the most traded commodity
   • Refining separates crude by boiling point, then reshapes the molecules
   • Cleaner fuels and petrochemicals have reshaped the barrel
4. Part 4 How long will oil last, and why does its price swing?

   Two questions about oil recur in every decade: when will it run out, and what will it cost? Smil's answers are that it will not run out in any sudden way, and that its price cannot be forecast. The years 2024 to 2026 tested both answers, swinging from fears of a glut to the largest supply disruption on record.

   • Reserves are an economic category, and peak-oil forecasts keep failing
   • Oil prices move mostly on politics and surprise
   • From a looming glut to the largest supply disruption on record
   • Oil's benefits came with heavy burdens
5. Part 5 Natural gas, LNG, shale and coal's future

   Natural gas is the cleanest-burning fossil fuel and the main feedstock for nitrogen fertiliser, but it is bulky and costly to move. Liquefaction turned it into a global commodity, and 2026 showed how exposed that trade is. Coal, the dirtiest fuel, has proved far more persistent than many forecast.

   • Methane burns cleanly, but its low density and leaks are the catch
   • LNG turned gas into a global trade, and 2026 exposed its fragility
   • Coal is far more persistent than its critics expected
   • Gas is the best fossil bridge, but fossil fuels will fade slowly
6. Wrap-up Key terms, try it in the table, final quiz, sources