Understand the impact of your crude oil supply chain

In spite of the fact that oil demand is on course to plateau by 2030,  it remains the most widely used energy source globally, despite growing pressure to decarbonise. As economies transition toward net zero, the oil industry faces a fundamental challenge: unlike metals and minerals, there is no credible decarbonisation pathway for crude oil. The only way to significantly reduce its emissions is to use less of it — a reality that companies with oil exposure must prepare for.

What about carbon capture, utilization, and storage (CCUS)?

The oil industry often places a strong emphasis on CCUS as a way to decarbonise fossil energy, however: investment and capacity, even in the most optimistic cases, is not enough to be a credible pathway to meet net zero targets in 2050.

With that said, upstream emissions do account for 10–30% of crude oil’s footprint. In this article, we break down how emissions vary across the crude oil supply chain, why understanding your oil intensity is critical, and how asset-level carbon data can help companies comply with regulations, manage financial risk, and make informed low-carbon decisions.

What is crude oil’s carbon footprint?

Oil demand growth is expected to slow through this decade. But today, oil demand persists, accounting for 33% of global CO₂ emissions from fossil fuel combustion.

The petrochemical sector continues to drive consumption, and industries from transportation to heavy manufacturing remain reliant on oil-derived products. Meanwhile, regulatory frameworks such as the EU’s Carbon Border Adjustment Mechanism (CBAM) are set to impose stricter carbon pricing on carbon-intensive imports (for which crude oil refined is often used as a fuel source in manufacturing), increasing financial and compliance risks for businesses that fail to track their emissions. 

While emissions vary significantly across different industrial materials, most of oil’s carbon impact occurs at the point of combustion — when it’s mostly used as fuel. Unlike metals, where emissions vary based on ore quality, energy sources, processing and recycling methods, the vast majority of crude oil’s emissions are locked in from the moment it’s extracted.

Yet, upstream emissions from extraction, refining, and transport still play a crucial role in determining the total carbon intensity of a barrel of oil. For businesses that buy, trade, or finance crude oil, these supply chain emissions matter.

In Europe, for example, the carbon intensity of imported crude oils ranges from 4–50 grams of CO₂ equivalent per megajoule (g CO₂e/MJ) with an average of 12 g CO2 e/MJ. As we’ll see in the coming sections, relying on industry averages is not something we recommend — though it can be useful to know how averages vary across regions.

In the next section, we break down the four key stages of crude oil emissions and how they impact total carbon intensity.

What causes crude oil’s emissions?

While the majority of crude oil’s emissions occur when its refined products are burned as fuel, significant emissions are generated before it ever reaches the end user. Understanding where emissions originate in the crude oil supply chain is critical for businesses looking to measure, manage, and report their carbon footprint accurately.

What drives crude oil’s life cycle emissions?

The carbon footprint of crude oil varies depending on several factors. Let’s break it down by stage:

1. Extraction and processing

• Production techniques — some oil reserves are more difficult to explore and require energy intensive oil recovery techniques such as water and gas reinjection, fracking, steam flooding or upgrading. Some oil production sites have fully switched to renewable electricity. 
• Gas flaring — the amount of gas flared is a significant differentiator for carbon intensity of crude oil. Special attention is paid to so-called routine flaring that refers to the continuous combustion of associated gas during standard oil production operations when there are insufficient facilities or suitable geological conditions to re-inject the gas, utilize it on-site, or transport it to a market.
• Methane emissions — methane is 80 times more potent than CO₂ over a 20-year period, making its emissions a major contributor to crude oil’s footprint. Typical sources of methane emissions include unburnt methane from gas flaring, gas venting during maintenance activities, process vents, small leaks, and seeps from the equipment and uncontrolled material releases.

2. Transport & distribution

• Distance and transportation mode affect the total footprint. Crude oil needs to be delivered first to the export hub or storage terminal, consumed locally or transported to global locations to be refined (e.g. via crude oil tankers). Then, refined products need to be distributed to end users. For example, transportation on a conventional truck would be much more carbon intensive than transportation via pipelines or vessels. 
  
  • The recent shift toward non-Russian oil and tensions, including those involving the Red Sea shipping corridor, have led to increased transportation costs and emissions, and increased demand for long-haul shipping as oil routes shift from Russia-to-Europe to Russia-to-Asia.

3. Refining

‍

• Refining crude into usable fuels is highly energy-intensive and can account for 3–10% of a barrel’s total emissions. The energy intensity of refining depends on the crude’s quality and the complexity of the refinery configuration. Some refineries are far more carbon-intensive than others due to:

• Energy source (carbon intensity of supplied electricity, on-site generation).
• Refining complexity (heavy crude requires more processing).

4. End-use emissions

• Emissions for crude oil vary depending on the end use case, too. Combustion is the base case for fuels, however some refined products are not made to be combusted, like lube oils. Products of the petrochemical industry can also have different end of life treatment, that can include recycling and landfill.

• 70–90% of oil’s lifecycle emissions come from burning oil-derived fuels, with indirect emissions accounting for only 10–30% of oil’s lifecycle emissions intensity.

Below is an example of how significant each source of emissions could be, based on IEA’s Spectrum of the well-to-tank emissions intensity of global oil production, 2018:

Because of these variables, the embodied carbon in purchased crude oil can vary significantly. Businesses that rely on industry-wide averages may be under- or overestimating their true emissions. According to the IEA, the most-emitting sources of oil produce more than four times the indirect emissions than the least-emitting sources.

This is why when it comes to carbon accounting, it’s so important to understand your specific commodity and its corresponding supply chain. 

So what’s the takeaway?

Businesses exposed to crude oil supply chains must track emissions at every stage, not just at the point of combustion. The choice of crude source, extraction method, refining pathway, and transport mode all influence the total carbon footprint, making granular supply chain data critical for accurate reporting.

Why crude oil emissions vary by region

The carbon intensity of crude oil varies significantly by region, driven by differences in extraction methods, resource quality, energy inputs, and transport distances.

The visualization below, based on data from the article by Masnadi et al. (2018), shows how the carbon intensity of crude oil production can vary depending on the country of origin:

‍

Here’s a glimpse at some regional differences in crude oil emissions:

Middle Eastern crude:

‍

• Thanks to large, productive reservoirs, Middle Eastern crude typically has lower emissions associated with each barrel due to ease of extraction. The above-mentioned study shows a low carbon intensity of 4.6 grams of CO₂e per megajoule, or approximately 27 kg of CO₂ e per barrel.
• Many fields have low levels of flaring and venting, which means less methane emissions. Some regions in this area boast a flaring intensity level of less than 1%.

Canadian oil sands:

‍

• This region has traditionally been categorized among the highest-emission crude sources due to energy-intensive extraction and upgrading processes.
• Oil sands must be heated with steam (steam-assisted gravity drainage, SAGD) or mined and processed, both of which require large amounts of fuel and water.
• Methane flaring and venting further increase emissions.
• However, progress has been made, with the average greenhouse gas (GHG) intensity of Canadian oil sands having fallen by 23% since 2009. In 2022, mined synthetic crude oil averaged 86 kg CO₂e per barrel.

US shale oil:

‍

• Carbon intensity varies widely depending on well efficiency and methane management. For example:
  
  • The Permian and Delaware basins have a carbon intensity of about 18.1 kgCO2e per barrel of oil equivalent (boe)
  • The Louisiana Gulf Coast area reaches 95.4 kgCO2e/boe
• Tight oil (fracked shale) is typically more carbon-intensive due to the large number of wells and energy used for drilling and hydraulic fracturing.
• Methane leaks from production and gathering systems can significantly increase lifecycle emissions.
  
  • Recent research indicates that oil and gas operations across the US are emitting more than 6 million tons of methane per year, with total leaked emissions ranging from less than 1% to as much as 9.6% of total volume, averaging 3% across surveyed regions.

Deepwater offshore crude:

• Offshore drilling can have high production emissions due to energy-intensive operations. That said, once operational, deepwater fields can have lower emissions per barrel compared to other sources due to efficient extraction, high productivity, and minimal flaring.
  
  • For example, deepwater production in the Gulf of Mexico had a production-weighted average GHG intensity of 7 kg CO2e/boe in 2022, which is lower than many other oil-producing regions.
• Deepwater offshore wells consume more energy and require more material for construction, leading to higher initial GHG emissions. However, these emissions are offset by the higher well productivity of offshore deepwater fields.
• Offshore producers have an average emissions intensity of approximately 17 kg per boe, with the vast majority of operators falling in the 10-40 kg per boe range.

Understanding why and where crude oil emissions intensity varies is important, but what does it mean for companies? Here’s why tracking your crude oil supply chain matters now more than ever.

Why tracking your crude oil supply chain matters

1. Regulations are evolving

Carbon pricing mechanisms like the EU CBAM and UK CBAM are putting a carbon price on carbon-intensive commodities, many of which are manufactured through using crude oil as a fuel source. And regulatory frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) require more detailed Scope 3 emissions reporting, including fossil fuel-related emissions. 

The upcoming EU ETS2, set to start in 2027 as part of the Fit for 55 package, will cover emissions from road transport and buildings. In this system, fuel suppliers will be responsible for the emissions associated with the fuels they place on the market, effectively addressing upstream emissions.

Non-compliant companies will face a range of penalties, including subsidy suspension and financial penalties.

2. Investor and lender scrutiny is increasing

Financial institutions are shifting away from high-carbon assets; major investors and banks are reducing exposure to unreported or high-carbon supply chains. Additionally, sustainability-linked finance is growing. Many banks now offer preferential lending rates for businesses that demonstrate carbon transparency and reduction efforts.

Failure to disclose emissions increases financial risk — without accurate data, businesses may face higher capital costs, difficulty securing financing, or investor divestment.

3. Corporate climate targets demand accurate emissions data

For those companies that have committed to net-zero goals, sourcing lower-carbon crude and optimizing refining and transport choices can reduce overall corporate emissions intensity. Tracking oil supply chain emissions can also help to enable smarter procurement decisions that align with climate targets and regulatory expectations.

4. Reputational risks are increasing

Transparency on supply chain emissions is key as scrutiny of fossil fuel investments increases. Stakeholder pressure is growing — customers, investors, and regulators are demanding more carbon data. Transparency can be a competitive advantage. Businesses that measure and disclose their crude oil life cycle emissions accurately can differentiate themselves in an increasingly carbon-conscious market.

Tracking the emissions intensity of your crude oil supply chain is now a business necessity. Companies that understand their supply chain emissions will be better positioned to comply with evolving regulations, secure financing, and reduce climate-related business risks.

How to measure crude oil emissions accurately

Many businesses rely on global average emissions factors to estimate their crude oil footprint, but this approach can be highly misleading. The carbon intensity of crude oil varies by extraction method, refinery efficiency, transport mode, and origin. 

Asset-level data is essential for accurate reporting and regulatory compliance.

CarbonChain: ‍The industry standard solution for carbon management

CarbonChain’s platform provides supply chain-specific carbon intensity calculations based on real-world assets. With CarbonChain, companies can:

→ Identify the lowest-carbon crude sources

→ Understand the emissions impact of their refining and distribution choices

→ Report oil-related emissions with accuracy for regulatory compliance

How CarbonChain helps businesses track and reduce crude oil emissions

Crude oil remains a dominant energy source, but its emissions intensity is under increasing scrutiny. Businesses interested in managing their financial, regulatory, and reputational risks — as all businesses should be — must focus on tracking, managing, and reducing their oil-related emissions to remain compliant and competitive. 

CarbonChain provides granular, asset-level oil emissions data to help companies make informed, low-carbon decisions. Need accurate crude oil emissions data? CarbonChain helps businesses measure, manage, and reduce supply chain carbon intensity. Book a demo today.