When Americans think about the price of oil, they usually focus on the number quoted every day in financial markets. If Brent crude is trading above $100 a barrel or West Texas Intermediate is near $100, those numbers become shorthand for whether oil is expensive or cheap. But that market price is only part of what ultimately determines the cost of getting crude oil to a refinery.
But transportation has become a cost that has become impossible to ignore. Reuters recently reported that shipping roughly 2 million barrels of crude from the United States to Japan aboard a very large crude carrier could cost about $81 million. That works out to approximately $40.50 for every barrel on the ship, compared with roughly $9 million for a similar voyage a year earlier. At current rates, freight alone can represent a huge addition to the underlying value of the oil.
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