From Paper Oil to Physical Oil: Where Does the Price Gap Come From?

The global price of oil on paper and physical oil has developed a large and unprecedented gap.

The world price of oil on paper and physical oil has experienced a large and unprecedented difference.

Ambassador Arjan: The price of oil on paper and physical oil has a big difference:

1- Strange changes in the price of oil from the time of purchase to delivery: Oil is facing strange changes these days. The difference in the price of oil from the price of the panel to the price that finally reaches the customer is different from the earth to the sky. As far as according to reports, the price of Brent paper oil is $107, but some transactions of physical oil have reached $154, and there is a gap of $47 per barrel between the paper price and the physical price of oil.

2- From the contract price to the final price: Financial Times also wrote in a report that the price of oil in the financial markets is different from the actual price of oil and its products in the exchange market. The ambassador said that the price of Brent oil contracts is now only about 60-70% of the final price of crude oil at the time of delivery to the customer. This means that now when the oil reaches the customer, it is 30-40% more expensive than the price at the time of the contract. While in the past, the final price of physical delivery was only 5-10% different from the price at the time of purchase.

3- The reason for the difference between the contract price and the price of physical oil: the fact that there is a big difference between the price of oil on the board and the physical price of oil is due to the difficult conditions of transporting oil and the Persian Gulf. The cost of transportation and insurance of oil tankers has greatly increased under the influence of the conditions in the Persian Gulf, hence 30 to 40% of the final price of oil per barrel is the cost of transportation and insurance. According to a Reuters report, the cost of insurance for each oil-carrying ship in the Black Sea has increased from about 200,000 dollars to 2.5 million dollars in recent months, and in the Persian Gulf, this cost has increased by 150% more than in the Black Sea. The war against Iran and the war in Ukraine are the two main reasons for increasing the cost of oil tanker insurance in the Persian Gulf and the Black Sea.

4- Why the drop in oil prices does not affect the drop in the price of physical oil: According to the report of the Financial Times, the cost of transporting oil has increased between five and 10 times compared to before the Iran war; The factor that causes physical oil to remain expensive even despite the drop in the price of financial indicators, because even despite the reduction in contract prices, oil transportation routes in the Persian Gulf and the Black Sea are still not sufficiently secure, and the price of transportation and insurance of oil tankers is still high.

5- If the difference between the physical price of oil and the price of the board continues, what will happen? It should be noted that refineries and oil-consuming industries need oil that is actually available and can be delivered to the destination at a certain time, not oil whose price is on the board. Therefore, it is the physical price of oil that ultimately determines the final price of goods and products, not the table price! In this situation, the high physical price of oil can ultimately fuel global inflation.

6- Grounding of the aviation industry: The high physical price of oil can ground one of the most important transportation sectors in the world, that is, the aviation industry. In fact, the energy crisis is not only limited to the extraction and transportation of crude oil, but the refining capacity is also under pressure. The increase in the price of physical oil and the lack of refined products have put a lot of pressure on the aviation industry, causing a sharp increase in the cost of airplane fuel and making it more difficult to supply fuel at some airports. In addition to raising ticket prices, this crisis has forced airlines to reduce flights, change air routes and revise their profit and loss forecasts. According to Eurocontrol, the price of jet fuel in Europe reached an average of $4.63 per gallon in September 2026; More than double the average of $2.26 in January and February. The price reached $4.92 per gallon on September 18.

7- Inflation in the world is getting more intense: the increase in the price of physical oil has not only increased the cost of gasoline and diesel; This shock has been transferred to the global economy from transportation, electricity production, petrochemicals, chemical fertilizers and food prices. Kristalina Georgieva, Managing Director of the International Monetary Fund, warned on October 7 that the global economy is facing a negative energy supply shock in the Middle East and other inflationary pressures, and the negative results of this situation will affect all countries. In its September 2026 forecasts, the European Central Bank announced that euro zone inflation, which was around 2.1% in 2025, may reach 3% in 2026 and increase to 3.6% in the fourth quarter. The European Central Bank considered the main cause of this increase to be the jump in energy prices caused by the war against Iran.

8- Transferring oil inflation to people's pockets: The global oil shock does not remain only in financial markets or economic statistics; Its cost extends from the fuel station and energy bill to the daily shopping basket of households, and if the supply disruption continues, it can simultaneously reduce people's purchasing power and weaken economic growth. FAO's global food price index reached 136 units in September, which was the highest level in the past few years. The price of sugar increased by 6.1% and the grain index by 5.1% compared to the previous month. In Japan, the price of manufactured goods in September was 6.8% higher than the previous year, and the cost of imports grew by 24.5% based on yen. These statistics show that the cost of the energy crisis has gone beyond fuel and plane tickets and has been transferred to the production, import and price of goods; As a result, households pay more for transportation, energy and daily purchases, and their purchasing power decreases.