It’s actually a common question in the oil and gas industry. Even on this site you’ll see upstream, midstream, and downstream on the menu bar above. To understand the answer, think of a pipeline.
Starting near an oil well or offshore rig, a pipeline transports oil through the mountains and land to a nearby refinery. If you think about it, pipelines carry a “stream” of oil that slowly percolates down to the next stop in its journey. Now, this may or may not be why it’s actually called upstream and downstream, but it sure makes the analogy easier to remember.
Keeping with this thought process, upstream means the actual source of the oil, and downstream deals with the last steps of the oil’s journey. What would that be? The pump, for one!
But for a more polished definition, downstream is anything from refining the crude to marketing the finished product. Marketing isn’t just advertising, either. It’s transporting the finished product to retailers and end users. Phillips 66 is a notable downstream company.
So, you have upstream companies who extract the oil from the earth’s crust, and then you have downstream companies who refine and market that oil to the masses.
Midstream companies, as a quick aside, link upstream and downstream activities together. So, pipelines, storage, and other means of transportation from source to refinery would be midstream activities.
Now you know some of the most important terms in the oil and gas industry!