For a long time, Brent crude oil futures have been used by global investors and policymakers as a core benchmark for measuring energy prices and predicting inflation. However, geopolitical conflicts in the Middle East have completely shattered this pricing framework. Amrita Sen, co-founder of energy consultancy Energy Aspects, points out that there is no unified price for oil; futures contracts are merely paper financial prices and cannot reflect the true costs in the physical market. What truly drives inflation is refined oil products such as gasoline and diesel, not crude oil itself. The biggest macroeconomic risk in the current market is that policies and capital markets continue to use Brent futures to assess energy pressures, underestimating the sustained inflationary impact from bottlenecks in refined oil products, shipping, and refining capacity. The gap between futures and spot prices has widened dramatically: futures prices significantly undervalue Asian physical crude oil costs. Historically, the price difference between Brent crude futures and spot crude oil has remained relatively stable. From 2007 to 2019, the standard deviation of the spot-futures price difference was only about $1 per barrel, meaning futures largely tracked the physical crude oil market. This year, however, this standard deviation has surged to nearly $8 per barrel, even briefly exceeding $20 per barrel in September, indicating a severe divergence between futures and spot prices. According to Argus Media data, current Brent futures prices represent only 60%-70% of the landed cost of Asian crude oil, while in normal years this proportion is close to 90%. Compared to diesel prices, Brent futures only account for 50%, compared to 80%-90% under normal circumstances. Simply put, the oil price seen on the trading screen is significantly lower than the actual cost of crude oil purchased by Asian refineries. The core reason for this phenomenon is not a supply disruption, but rather spatial constraints. The value of a barrel of crude oil no longer depends solely on extraction costs, but on its location and whether it can be delivered to refineries at a low cost. Oil flow through the Strait of Hormuz has rebounded from a low of 2 million barrels per day in April to 11 million barrels per day, but overall Middle Eastern oil exports (including pipeline detours) remain 2.5 million barrels per day lower than pre-war levels. Tanker capacity is strained, forcing a large volume of crude oil to use longer and more complex routes. Crude oil crossing the Strait of Hormuz may not be delivered quickly to marginal refineries in urgent need of raw materials. Soaring shipping costs: Transportation has become a new rigid driver of oil prices. Many market participants focus only on crude oil prices themselves, ignoring the weight of freight costs in this round of energy pricing. Compared to before the conflict, crude oil shipping costs have increased 5-10 times, and the landed price of Atlantic Basin crude oil to Asia is five times higher than before the war, with freight costs being the primary driver. The current rebound in flow through the Strait of Hormuz largely relies on ship-to-ship (STS) transshipment. This transshipment method has high operating costs, continuously pushing up VLCC (Very Large Crude Carrier) charter rates, with the tanker market entering an unprecedented high charter range since early September. This pattern creates a self-reinforcing cycle: the more ship-to-ship transshipment occurs, the longer tankers are occupied, further shrinking available shipping capacity and continuously raising the bottom of shipping rates. This means that even if the FOB price of crude oil remains stable, freight rates can rise independently, directly increasing the cost of finished oil products. In the past, the market was accustomed to treating freight rates as a one-off, short-term disturbance; now, shipping infrastructure, insurance premiums, and detour costs collectively constitute long-term constraints, becoming a stable premium in energy prices. Market trading behavior is distorted: policy intervention suppresses futures, and physical fundamentals are underestimated. Although Kayrros inventory data shows a cumulative decrease of 650 million barrels in global crude oil inventories since the conflict, indicating a tight physical supply, traders are unwilling to hold long positions in crude oil. The core reason behind this is that the US government has continuously released policy signals to suppress oil prices, leading to a consensus expectation in the market that the US will use various tools to suppress energy prices before the election. Policy pronouncements have changed the structure of market participants, reducing active trading funds in the market, and the futures market is more dominated by algorithmic trading, with prices no longer fully reflecting physical inventories and geopolitical risks. The price discovery function of the futures market has weakened, and its hedging function has also become ineffective. Futures are no longer an effective hedge for real procurement cost risks for physical refining and trading companies, leaving them to passively bear the pressure of rising spot prices and freight rates. A key misconception exists here: many investors previously predicted that the conflict would push oil prices to $200/barrel. This judgment itself wasn't wrong, but the wrong underlying asset was chosen. Brent futures were suppressed by policy expectations, but the prices of physical crude oil and refined products have already fully reflected the risk premium. Refining bottleneck: Soaring refined product crack spreads, inflation drivers shift to diesel . More severe than the crude oil shortage is the structural shortage of global refining capacity. Insufficient refining capacity outside of China, Ukraine's continued attacks on Russian refining facilities, and the closure of export-oriented refineries in the Middle East have all contributed to compressing global refined product supply. In recent months, refined product trading prices have reached twice the price of crude oil, and crack spreads have remained at historically high levels—a rare occurrence in the energy market. For decades, crude oil has been a core indicator of inflation, with crude oil prices leading gasoline and diesel prices, showing a high degree of correlation. However, this transmission chain has broken. What is truly pushing up the CPI is not crude oil, but diesel and gasoline. Diesel permeates logistics, freight, agriculture, and industrial production, and its ability to transmit global commodity circulation costs is far stronger than that of crude oil. A significant change is that since May of this year, the correlation between the yield on 10-year US Treasury bonds and diesel prices has exceeded that of crude oil prices for the first time. The bond market is pricing inflation directly in diesel, rather than Brent crude. US policymakers have also recognized this, shifting their policy focus from suppressing crude oil futures to stabilizing diesel prices. However, policy intervention in crude oil futures can only affect the financial market and cannot address the real constraints imposed by refining capacity, tanker capacity, and ship-to-ship transportation. The final refined oil prices are still prone to independent increases. Macroeconomic Implications: The Commodity and Macroeconomic Analysis Framework Needs Reconstruction Traditional macroeconomic analysis frameworks tend to directly use Brent crude oil futures and substitute them into inflation models and monetary policy predictions. In the current market environment, this approach significantly underestimates the resilience of energy inflation and leads to misjudgments. Investors need to adjust their perspective from three dimensions. First, distinguish between financial oil prices and physical oil prices. When calculating macroeconomic inflation, priority should be given to regional landed crude oil prices and diesel spot prices, rather than solely relying on exchange-traded crude oil futures. The futures-spot price gap, regional price spreads, and crack spreads are now core indicators that must be monitored simultaneously. Secondly, the constraints of supply chain infrastructure must be emphasized. Tanker capacity, insurance costs, refinery operating rates, and transshipment conditions are no longer secondary variables, but core pricing variables. The impact of geopolitical conflicts is more reflected in logistics and processing than in directly cutting off crude oil extraction. Even if total crude oil supply does not experience a precipitous drop, logistical bottlenecks can still drive up end-use energy costs. Thirdly, monetary policy's energy risk assessment should shift towards refined oil products. Central banks such as the Federal Reserve need to focus on monitoring diesel prices when assessing energy inflation. Rising diesel prices will permeate the entire commodity supply chain, bringing stronger and more persistent core inflationary pressures, which will limit the scope for interest rate cuts and may even force a renewed tightening of policies. Conclusion The global oil market has moved beyond the era of "one Brent price measuring everything." The futures market is interfered with by policy expectations and algorithmic trading, impairing its price discovery function; the physical market is fragmented by geographical location, tanker capacity, and refining capacity, resulting in independent pricing for different regions and different products. In the near future, the core issue of energy inflation will not be whether there is enough crude oil, but whether it can be processed and transported to where it is needed at low cost. For investors and policymakers, ignoring refined oil and shipping costs and focusing solely on Brent futures could lead to a continued underestimation of the macroeconomic pressures brought about by this energy cycle.