Environmental Investing

At One Day In July, we focus sustainable investing on the environment, recognizing the urgency of climate change and the tangible nature of the metrics available. We work to cut through the frenzied noise surrounding this growing field, while sticking to our basic principles: simplicity, low fees and personalized attention.

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Oil Formation

Creating crude

In a manner of speaking, oil starts with the sun – or, more specifically, with energy the sun conveyed through photosynthesis at the start the Cenozoic Era or earlier (65+ million years ago). As we burn oil and natural gas today, breaking the bonds that hold these hydrocarbons together, we unleash energy bestowed by the sun in prehistoric times.

At the beginning

Millions of years ago, the microscopic organisms that conducted that photosynthesis sank to the ocean floor along with other plant and animal matter. If those materials were not consumed during the descent and fell into an area with minimal oxygen (and therefore limited decomposition), they created an organic layer that was buried deeply under growing strata of sediment. As time passed, the alchemy of pressure, heat, and chemical reactions transformed these materials into a waxy, solid called kerogen, and a thick, black substance called bitumen. These are the main types of organic matter found in source rocks – such as shales and limestones – that produce oil or gas.

Accumulating debris continued to bury these rocks, the pressure built, and the heat of the Earth’s interior further transformed kerogen into oil and natural gas. Lighter than the rock and water around them, these hydrocarbons tended to rise upward until they were trapped by some impermeable layer – and a reservoir began to form.

Making it work

To be useful, crude oil must be refined after it is pulled from the earth. This process removes impurities, such as sulfur or sand, and separates the oil’s components by weight – from methane to asphalt – turning crude oil into a variety of petroleum products. As the various hydrocarbons within crude oil have different boiling temperatures, refineries can heat the substance until vapors rise and then condense back into liquids on tiered trays of a distillation tower. The distilled components are then ready for use or further refinement.

According to the U.S. Energy Information Administration, a typical 42-gallon barrel of oil processed at U.S. refineries in 2018 produced 19.4 gallons of finished motor gasoline – and 15 other petroleum products, from distillate fuel oil to waxes.

Burning oil launches a hydrocarbon combustion reaction that creates carbon dioxide, water and heat – releasing the energy stored during photosynthesis millions of years earlier.

2A useful source for definitions of this and other related terms is the Schlumberger Oilfield Glossary, available here:www.glossary.oilfield.slb.com/

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