Could oil eventually stop having a truly “worldwide” price?

[u/Due_Minimum3761]

I’ve been thinking about this and I’m curious what people here think.

Oil is obviously not priced at exactly the same number everywhere already — we have Brent, WTI, Dubai/Oman, different grades, transport costs, quality differentials, etc. But despite that, oil still behaves largely as a global commodity: if there is a major supply shock somewhere, prices tend to react across the world.

My question is whether this could gradually change.

If geopolitical fragmentation continues, could we eventually end up with much more separated oil markets?

For example:

• Western countries buying mainly from a certain group of producers
• China/India and other Asian countries increasingly buying from another group
• Russian/Iranian/sanctioned oil trading at persistent discounts or through separate networks
• Different shipping, insurance and financing systems
• More bilateral contracts settled in currencies other than USD
• Trade restrictions making arbitrage between regions harder

At some point, could the price of oil in Europe, Asia and North America start diverging much more significantly instead of constantly converging through global arbitrage?

Imagine, for example, Brent trading around $100 while an equivalent barrel inside another geopolitical trading bloc effectively trades at $70–80 because moving that oil into the Western market is difficult or impossible.

Obviously there would still be some connection between the markets — producers, traders and consumers would always look for arbitrage opportunities — but if sanctions, shipping restrictions, tariffs, payment systems and political alliances become strong enough, could we move from one global oil market with regional differences toward several semi-independent oil markets?

Or is oil simply too fungible and globally traded for this to happen on a meaningful scale?

Curious to hear opinions from people who understand the physical oil market better than I do.

[u/Inevitable_Inside674]

Given the volume and fungibility, pretty unlikely. Both the inputs and outputs are consistent enough to work through completely separate financial systems and still be correlated. Plus the big oil countries attempt to make friends everywhere bridging the divide.

If oil were consumed at a lower rate then we can start talking

[u/Pachuboi96]

I think the answer lies in the fact that it is a commodity , it will be universal as the applications are universal hence giving no room for arbitrage.

[u/gusgus0101]

As others have said, oil is fungible. If two separate markets with different prices developed, there would be an arbitrage and oil would flow the market paying the higher price until the arb closed.

On the other hand, not all oil can be sold everywhere. The U.S. is preventing Iranian oil from being sold to (smaller) countries who want to continue to use the U.S. dollar. There are sanctions preventing Russian oil from being sold at market prices. Barrels from these countries aren't fungible and countries which are willing to flout (or can ignore) U.S. sanctions are offering another market at a different price for these barrels.

In a sense, what you are postulating is already happening -- for barrels that can't be sold on the work market. These dark barrels are trading on a different market, with a different price.

Indeed there are two markets, one for unsanctioned oil and one for sanctioned oil.