Like coal, oil is made from plants and other organisms trapped beneath the surface of the Earth. Under intense pressure and high temperatures, these organisms have been transformed over millions of years. Oil is found collected in pockets in porous rock, or as oil sand.
The world's biggest oil producers in 2011 were Saudi Arabia, Russia, United States, Iran, China and Canada. A large share of the oil is refined into gasoline, diesel fuel and aircraft fuel. A smaller portion is used as heating oil.
Oil is also used to produce electricity. In 2008, 5 per cent of the world's electricity generation came from oil. In the EU, oil accounted for 3 per cent of the electricity production in 2008.
Negative impact on climate and environment
Oil contains a number of elements that can damage the environment. The incineration process creates carbon dioxide, which contributes to climate change. Sulphur dioxide, dust and nitrogen oxides are also produced. Oil extraction also requires large volumes of freshwater. There is an obvious risk of oil spills in the extraction and transportation.
Oil is a peak-load energy source
Oil can be used to produce electricity and/or heat in different kinds of power plants. Oil is often used only as a peak-load fuel when other plants have problems or cannot deliver enough energy, for instance during cold winter days.
The importance of oil will decrease
The importance of oil for producing electricity and heat will decrease in the European energy system. One possibility (under consideration in Sweden, for example) is to replace oil with bio-oil in peak-load plants. Another possibility is to use wood pellets. Both these solutions do,however,have some drawbacks. Bio-oil is not suitable for long-term storage, and the use of wood pellets requires significant investments.