Base Oils are make between 75% - 95% of a finished gear oil. They are the most important part of the oil, and selecting the right base oil is a complex process. The most common references to base oil are in the terms 'mineral', 'synthetic', and 'semi-synthetic'. Terms such as those are simplified for the consumer, manufacturers use groups to determine base oils, Groups I, II, III, IV, V. A higher group number means a higher level of refinement. Groups I, II and III are created from crude oil, and are 'mineral' oils, whereas Groups IV and V are created using a chemical process and are called 'synthetic'. 'Semi-synthetic' oils are a blend of both mineral and synthetic oils, the blend quantities vary greatly with manufacturer.
Creating a Group I, II, and III base oil is a fairly complex process, it starts with the fractional distillation of crude oil. This process separates crude oil into a variety of hydrocarbons, most of which are petrol, diesel, kerosene, and heating oils. Amongst the byproducts is lubricating oil, which is roughly 1%-2% of the crude oil. The lubricating oil is a unrefined hydrocarbon with a chain length of between 18-40 carbon atoms.
To make a group I base oil the lubricating oil refined using solvents, and then undergoes a hydrofinishing process. A combination of these removes most of the impurities and makes the oil more uniform. Group I oils contain more than 0.03% Sulphur, and contain less than 90% saturates. These oils are generally the cheapest to produce and they oxidise more easily, and thus have a shorter service life. However they do have some upsides. The irregular molecules allow a wider range of additive packs to be used. In addition to that a seal swell additive is not required as the remaining impurities act as a natural seal swell agents.
Group II base oils are significantly more refined then group I base oils, this is due to the process they undergo called hydrocracking. Under the presence of hydrogen and a catalyst, the lubricating oil is heated to roughly 400 Celsius and put under high pressure at 3000 PSI. This removes the impurities and converts the mixed length hydrocarbons into ones of the same length. After this, vacuum distillation is performed to separate the base oil into batches of different viscosity. As a result of this, the sulphur content is below 0.03% and contains more than 90% saturates. The cost of group II base oils is very similar to group I base oils but they have superior qualities.
A group III base oil undergoes the same process as a group II, but for longer and at higher temperatures and pressures. This severe hydrocracking results in an extremely good quality oil, with resistance to oxidation, high stability, and an excellent viscosity index. For these reasons some non EU markets refer to group III as synthetics as they are deemed 'as good as synthetic oils'.
All group IV base oils are polyalphaolefin's (PAO's). These are entirely synthesised, and can be created in varying chain lengths with different properties. As these are all the same molecule the behaviour of these is uniform and predictable under varying conditions.
Group V is a catch all term that refers to any synthetic base oil that isnt't a PAO. Examples of these are; Biolubes, Esters, Diesters, Silicones, and Phosphates. There are many more examples with various uses. Most commonly they are used as a base for additive packs rather than as a base for a motor oil. Due to the variety in this group they all have unique properties for different uses.
Quality of a finished motor oil is not based on the type of base oil alone. It also depends on which additive packs are used, and what quantities are used. Blending is an extremely complex process, and there is no single 'right' way to do it, but there are plenty of wrong ways.