) -- There has been lots of talk about the "big drop" of oil prices in the past several weeks and talking heads have been quick to see a silver lining in the reduced input costs for manufacturers and for prices that you and I pay at the pump.

Well, I hate to rain on the parade, but the real world physical price of oil hasn't dropped much at all and is still more than $30 dollars a barrel higher than it was at this time last year.

That's because the "price" of oil that is universally referred on cable television and in newspapers is the U.S. and NYMEX-traded West Texas Intermediate (WTI) futures contract, a contract with enormous physical problems which has morphed into little more than a financial tool for hedge funds and algorithmic traders, and has become irrelevant to the real world prices that are being paid.

The price that almost all physical traders of oil are using instead to price their deliveries is a North Sea benchmark traded on the Intercontinental Exchange (ICE) known as Brent crude, which is today running a $23 a barrel premium to the WTI contract and has seen as wide a premium as $26 recently.

Brent crude was trading on Tuesday at $109 a barrel, a far cry from the oft-quoted "price" of oil of $84, Tuesday's traded price for WTI.

In case you might doubt me, here are a few prices of real grades of physical crude benchmarks pricing Tuesday around the globe, according to



These are the prices that refineries actually pay for crude oil and therefore are the limiting prices on what is being charged for distillates for electric plants and trucks, for jet fuel and, unfortunately, for gasoline to consumers at the pump. The next time anyone on


who claims to understand energy refers to the "relatively low" prices of oil near $80, you'll know that they haven't a clue what they're talking about.

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There isn't all downside to this realization about the price of crude, however. This insight might even lead you to some really great choices for investing.

First, a strong real price of oil is a very good sign that 2011 won't be a replay of 2008. Recessionary action does not normally lead to high commodity prices which (you now know) you are still seeing in oil (as well as in corn, silver, gold and others).

Second, real world high prices for oil are especially bullish for oil exploration and production companies, particularly those that have been growing their proven reserves over the last year. This is simple math: demand for oil, even in a slowdown, is not going to go in reverse and still most likely will increase a couple hundred thousand barrels this year.

Therefore, all new production will easily find a home globally. Put this together with high prices for oil and you have E+P stocks that will mint money this year and are selling at generationally cheap valuations, like


(APA) - Get Apache Corporation Report



(APC) - Get Anadarko Petroleum Corporation Report



(CHK) - Get Chesapeake Energy Corporation Report


Make the confusion on oil prices your advantage. Have a look at the opportunities afforded by understanding what the real world is paying for oil, and not what is being incorrectly quoted by the media.

At the time of publication, Dicker owned Chesapeake.