Markets are becoming increasingly hyper-local. That’s more true today than ever. Global transportation has been the great equalizer and has made so many things appear to be commodities.

That’s why real estate is hyper-local. You can’t just pick up an office building that has high vacancy and move it to a place where there is a shortage.

In the absence of a differentiated value, the discussion always degenerates to price. That’s why a pound of sugar tends to cost the same in Portland, Maine as in San Diego, California. A pound of sugar is a pound of sugar. There is no real dominant brand in sugar that distinguishes one supplier from another. It’s a true commodity.

But when we describe real estate we describe the property in terms of its characteristics, its amenities, and most importantly, its location.

Yesterday, the futures contracts for oil went into uncharted territory. Some prices went negative.

Let me take you through a sampling of prices.

Saudi Arabia light and heavy oil are both trading in the futures market at $19.07.

Oil in Mexico from the Mayan region varies in price depending on the destination. If the oil is destined for the US Gulf Coast, the price is negative $1.18. If that same oil is heading for Asia, then the price is $21.79. That difference in price is a reflection of differences in both transportation and storage costs. The US has so much oil at the Gulf coast right now, that they have no place to store it.

North Texas Sweet Crude is selling at a negative $41 per barrel. Arkansas Sweet Crude is selling for $11.50 per barrel.

Central Alberta Crude is at $10.93

These prices are all over the place. The only distinguishing factor is location and the local supply / demand balance in that market. The price difference is a reflection of the cost of storage and the cost of transportation to get the oil to where it is needed.

We’ve experienced an unprecedented collapse in global oil consumption in a matter of weeks.

When you take transportation systems out of the market, you create inefficiencies all over the place. Those who aren’t paying attention will be surprised. Those who understand the relationship between transportation and price will make sense of the inefficiencies in the market.

Now is the time to figure out where the supply chain disruptions are happening. They’re all over the place.

Expect a significant portion of the 6,000 independent oil companies to go bankrupt or be acquired in a distressed sale. The oil won’t disappear. The change will be in the ownership.

Don’t expect to see prices recover to the $50-$60 range for at least another 18 months.

Even the price of commodities vary by location when you take transportation out of the equation.