So what is the real oil price right now?

For all my reporting life, I’ve dreaded one question: What is the price of oil — the real one? Invariably asked during a crisis, it demands a neat answer, a precise dollar-per-barrel figure. But each time my reply is anything but: It depends on what kind of crude we’re talking about, when it is being sold and where.The Iran crisis is no different. Rather than offering a single price, what I can attempt is to shed light on today’s physical and financial oil markets, and why you can pick up a barrel of crude for $78 in Kansas or $286 in Sri Lanka.

In the midst of the latest Gulf conflict, oil has been an economic weapon and propaganda tool. Both Tehran and the US had been blockading shipments through the vital Strait of Hormuz waterway before at least a temporary reopening on Friday, and trying to jawbone the market in their favor.

Be wary of anyone saying one particular oil-price gauge matters more than the others. Whoever is betting on the cost of crude going up will argue Friday’s relief selloff doesn’t reflect reality, with shipping still severely disrupted. Those betting on a fall will have had their own views confirmed.

Broadly speaking, the oil market is split in two. The first part is the physical market, where real barrels change hands and they can be touched, smelled, almost savored. The second is visible only on computer screens. These are the printed financial contracts such as swaps, futures and options that change hands in electronic marketplaces. Traders call them paper barrels.The financial and physical markets are, of course, linked. But they do different jobs. The former is where traders transfer oil-price risk. By nature, it’s anticipatory. Sometimes, it prices in expected supply disruptions days, weeks or even months before they happen. And it prices supply recoveries well before the black stuff flows again. It’s a window into a possible future, a distillation of probable outcomes. It isn’t, however, a forecast, just the price buyers are willing to pay today for a barrel that would be delivered in the future.

The physical market is where traders go to buy and sell straightaway the real stuff that goes into refineries. It reflects actual supply and demand right now. The key to prices is what kind of barrels are available, and how easily they can be accessed and shipped. It’s more about logistics than mathematical models.Crucially, the supply of paper barrels is unlimited and that of physical barrels constrained, more so during a shock. Ilia Bouchouev, an ex-oil trader now at the Oxford Institute for Energy Studies, estimates the physical market has lost more than 10 million barrels since the war started. But the financial market has traded an extra billion barrels when all the different paper instruments are aggregated.In normal times, the price of the financial and the physical markets are closely aligned, plus or minus certain differentials and ancillary costs. In these periods of calm, the easiest answer to “what’s the real price of oil?” is to look at any financial screen. Typically, all the paper benchmarks — Brent, West Texas Intermediate and Dubai — trade in unison, within a few dollars.

But these aren’t normal times. Physical prices have skyrocketed as refiners hunt for any barrels for immediate delivery. What used to trade a few cents above or below the paper benchmark is being sold at a premium of $10, $15, $20 or even higher. Saudi Arabia will sell its flagship Arab Light to European customers at a premium of $27.85 in May. Last month, it was a discount of 65 cents. “Physical transactions are under a lot of strain,” Josu Jon Imaz, chief executive officer of Spanish refiner Repsol SA, says.

And this is before adding ancillary fees, which don’t feel so ancillary any more. Freight costs that used be $1 a barrel today set you back as much as $25. Insurance is a small fortune. These extra expenses don’t figure in the financial market because no one needs to physically move a paper barrel. But add them in and “the barrel of oil, door-to-door, is way above the headline price,” says HSBC Holdings Plc CEO Georges Elhedery.

This gap doesn’t mean the physical and financial markets are disconnected, or that the latter is broken, as many bloggers and Wall Street types claim. They’re simply doing different jobs and offering two different answers. In broad terms, the physical market tells the price from today to about 30 days ahead; the financial market usually from two months hence to 10 years out.

So what message is being conveyed? One of my go-to oil traders, who’s happy to impart (anonymously) the knowledge built over multiple crises, puts it simply: The physical market shows barrels are extremely tight today; but the paper market is saying that if you look at a distribution of possible outcomes a couple of months from now, there are many scenarios where that eases.

The different timeframe is critical. In the early days of the war, the paper market was where the fears about the conflict’s impact showed up. The Brent contract surged to $120 in early March. But because of the excess supply sloshing about back then, its physical counterpart barely made it above $100. Now, the situation has inverted: The physical market is still pricing today’s scarcity; the financial market is pricing the end of the war.

The irony is that financial traders, oil speculators par excellence, have softened the Hormuz shock by pricing in its potential resolution. But oil refiners must live in the present. Security of supply overrides thoughts about price. My trader contact says refiners, particularly if state-owned, will pay whatever it takes to guarantee delivery. And they will do so in way that’s disproportionate to the actual oil shock because not having a barrel — for a country’s energy needs and critical products — is existential in a way that overpaying is not.

Geography matters to price, too. Colonial-era terminology still lives on in this market, with an imaginary vertical line dividing the world at the Suez Canal in Egypt. The current oil shock started east of there, and that’s where the physical market and shipping costs have been most affected. Back-of-the-envelope math suggests some eastern refiners are going to pay north of $175 for “landing prices” — the sum of the barrel cost, its transport expense and other elements.

The fallout is, however, moving westward. Asian refiners are shopping in the Atlantic basin, from Norway to West Africa. The cost of Dated Brent, the reference for the physical North Sea market, briefly surged to $145 this month.

Even if Hormuz reopens, as President Donald Trump promised Friday, the shock’s impact will spread further west. The US, the largest oil-producing nation, will become the barrel of last resort. This is the land of cheap oil. Its refiners are buying crude at absurdly low prices compared to Asia and Europe. And because they’re connected by pipeline, they pay regular transport costs.

How cheap is cheap? Look at the daily “Crude Oil Price Bulletin” posted by American traders, pipeline companies and refiners as a reference for physical purchases. In the April 15 edition, West Texas Intermediate was $87.77. Colorado Southeastern goes for $78.27. Wyoming Sweet is $84.87, and Nebraska Intermediate commands $77.77. A lucky refiner with access to Utah Sweet can get it for $76.98. Western Canadian Select, a benchmark for the Alberta oil sands, goes for about $72.

Looking at those prices, you grasp the geopolitical and economic significance of the US shale revolution and Canada’s oil sands. In the middle of a historic oil shock, North America is swimming in the stuff.

The ultra-low prices won’t last, however, unless Hormuz reopens fully. An armada of tankers is headed toward the US coast no matter what happens in the Persian Gulf in coming days. They’ll still load US crude even if the ceasefire holds. All things equal, North American oil costs would increase, and the rises elsewhere would be capped as eastern refiners access the US market. We’re already witnessing the start. Mars crude, pumped out of the Gulf of Mexico, is one America’s more easily exportable varieties. Earlier this week, it went for $97.30 as it becomes the go-to US crude to ship.

I hope by now you recognize the difficulty of providing an easy answer on the “real” price of oil. And there are other factors to include, too.

First, should we refer to oil in nominal terms or real terms? In the latter, adjusted by the cumulative impact of inflation, oil prices would need to spike further to match previous crises. The nearly $150 record set in 2008 in both the physical and financial Brent markets is about $220 in today’s money.

And second, should we pay more attention to the price of the refined products consumers actually buy and less to the crude that refiners purchase? During an acute shock like the Hormuz shutdown, the cost of refined products such as gasoline and jet fuel rises faster than the stuff they’re made from. Politically and economically, that’s arguably much more important.

Ultimately, if cornered I will always say the physical market is king, and the price is always what’s paid today, not two months down the road. But I will insist on an average among regions, including North America.

On that basis, let’s say the real level this week was $125 or so. In a couple of months? There, probably, I’d listen to what the speculators are saying in the financial market. So far they’ve been proved right in judging the supply disruption and now the resolution. I agree, the price is headed lower.