What Is Crude Oil Used For? Key Products and Applications

Crude oil remains one of the most important resources shaping the global energy system and modern daily life. What crude oil is used for extends far beyond energy, ranging from fueling transportation to supplying raw materials for plastics, textiles, and a wide range of industrial products.

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This article examines how crude oil is used, the main products refined from it, recent factors driving price declines, and Indonesia’s evolving role as both a producer and importer in the global oil market.

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What is Crude Oil Used For?

Crude oil is a foundational resource used to produce a wide range of everyday products through refining. It is transformed into fuels such as gasoline, diesel, jet fuel, and heating oil, which power transportation and provide energy for homes and industries.

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Beyond fuel, crude oil supplies key raw materials for lubricants, asphalt, and gases like propane and butane. It also plays a vital role in modern life through petrochemicals, which are used to manufacture plastic food packaging, synthetic textiles such as polyester, nylon, and rayon, and household items including furniture foam, flooring, carpets, appliances, and insulation.

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Types of Crude Oil Products

What is crude oil used for? Crude oil is used as a primary raw material for producing fuels, energy, and a wide range of everyday industrial products. Here is the breakdown:

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1. Petrol (Gasoline): Petrol is the most widely used product derived from crude oil, with roughly half of each barrel refined into fuel for cars and light vehicles worldwide.
2. Diesel: Diesel is a hydrocarbon-based fuel distilled from crude oil and is essential for powering trucks, buses, trains, generators, and heavy equipment across industries.
3. Jet fuel: Approximately 10% of global crude oil output is refined into jet fuel, which enables commercial aviation and military air travel through its high energy efficiency and reliability.
4. Kerosene: A clear, combustible liquid obtained from petroleum distillation. It is commonly used in aviation, heating, and lighting applications in certain regions.
5. Paraffin: Paraffin is a more refined form of kerosene, that produces less smoke when burned. It is often used for household heating, lamps, and domestic energy needs.
6. Heavy Fuel Oil (HFO): HFO is a residual product left after lighter hydrocarbons are removed. It is mainly used in large ships, power plants, and industrial boilers.
7. Liquefied Petroleum Gases (LPG): LPG, primarily propane and butane, is widely used for cooking, heating, and as an alternative vehicle fuel, especially in off-grid areas.
8. Petrochemical Feedstock: These refined products  support chemical manufacturing, serving as the basis for plastics, fertilizers, solvents, and synthetic materials.
9. Lubricants: Lubricants refined from crude oil reduce friction and wear in engines and machinery, ensuring smooth and efficient operation.

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Read also: Energy Commodities for Investors Guide

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Why are Crude Oil Prices Falling?

Crude oil prices are declining mainly due to a widening supply-demand imbalance. A significant wave of new supply is entering the market from long-term projects approved before the pandemic, delayed during COVID-19, and now becoming operational.

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At the same time, OPEC and its allies, including Russia, have begun easing the production cuts they had imposed, while other major producers such as the United States and Brazil continue to increase output. This surge in supply has raised concerns about oversupply.

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Reinforcing this outlook, the International Energy Agency has warned that global oil markets could face a substantial surplus next year, further pressuring prices downward.

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Indonesia Crude Oil Production

Although Indonesia ranked among the top 24 oil-producing countries in 2023, it has experienced consistent declines in crude oil production each year. The country once benefited greatly from oil, particularly during the two major oil booms of the 1970s. Between 1974 and 1981, soaring global oil prices generated substantial foreign exchange earnings that supported rapid economic growth.

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The first boom in 1973–1974 followed OPEC’s decision to sharply cut exports, driving prices significantly higher. The second surge in 1979–1980 was triggered by the temporary shutdown of Iran’s oil industry during the revolution against the Shah.

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However, this momentum faded in the 1990s as Indonesia’s crude oil output began a long downward trend. Limited exploration activity and insufficient investment led to production increasingly relying on aging, mature oil fields.

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As a result, government production targets have repeatedly fallen short. By 2004, Indonesia had become a net oil importer, forced to rely on substantial fuel imports to satisfy growing domestic demand fueled by steady economic and population growth.

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Despite these challenges, Indonesia is not moving quickly to reduce its dependence on fossil fuels. Declining production is primarily linked to structural issues, including regulatory uncertainty, complex licensing procedures, legal ambiguity, and resource nationalism. Together, these factors have discouraged long-term investment and constrained the development of new oil resources.

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Read also: What Is Sustainable Investing in Global Markets?

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Conclusion:

Crude oil continues to play a central role in powering economies and supporting modern industries, despite growing attention toward alternative energy sources.

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Understanding what crude oil is used for helps explain its wide range of refined products and underscores its ongoing relevance, while recent pricedeclines highlight the impact of global supply dynamics.

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Indonesia’s long-term production challenges further illustrate how investment, policy, and resource maturity shape national energy outcomes. Understanding these factors is essential for navigating future energy and economic transitions.