Crack Spread Calculator
Calculate refinery profit margins with real-time crude oil and petroleum product prices. Supports 3-2-1, 2-1-1, and simple crack spread formulas.
Crack Spread Calculator
Refining margin analysis
Price Inputs
Most common US refinery benchmark. 3 barrels crude produces 2 barrels gasoline + 1 barrel distillate.
= $88.20/barrel
= $100.80/barrel
Crack Spread Result
Prices from OilPriceAPI.com. Crack spreads are theoretical gross margins and do not include refinery operating costs, transportation, or other expenses. 1 barrel = 42 US gallons.
How Crack Spreads Work
Crude Input
Refineries purchase crude oil (WTI, Brent) as the primary feedstock. The crude price is your cost basis for calculating margins.
Product Output
Crude is "cracked" into gasoline, diesel, heating oil, and other products. The spread formula weights these outputs based on typical refinery yields.
Margin Calculation
The crack spread is the difference between product revenue and crude cost, representing the refinery's gross margin per barrel processed.
Crack Spread Formulas
3-2-1 Crack Spread (Most Common)
The 42 multiplier converts $/gallon to $/barrel (42 gallons per barrel). This formula assumes a typical US refinery yield ratio.
2-1-1 Crack Spread
Used by refineries with equal gasoline and distillate output. Common in regions with balanced fuel demand profiles.
Simple Gasoline Crack
Single-product margin calculation. Useful for analyzing gasoline-specific profitability or simple hedging strategies.
Trading with Crack Spreads
Wide Spreads Signal
High crack spreads ($20+) indicate strong refining margins, often due to product shortages, refinery outages, or strong demand. Refiners profit.
Narrow Spreads Signal
Low or negative spreads indicate weak refining economics. May signal crude oversupply, product glut, or weak demand. Refiners may reduce runs.
Seasonal Patterns
Spreads typically widen before summer (driving season) and winter (heating demand). Refinery turnaround season (spring/fall) can create volatility.
Hedging Applications
Refiners hedge crack spreads to lock in margins. Traders use futures (NYMEX crack spread contracts) to speculate on margin movements.
Frequently Asked Questions
What is a crack spread?
A crack spread is the difference between the price of crude oil and the petroleum products refined from it (gasoline, diesel, heating oil). It represents the gross profit margin for oil refineries and is a key indicator of refining sector profitability.
What is a 3-2-1 crack spread?
The 3-2-1 crack spread is the most common refinery margin benchmark. It assumes 3 barrels of crude oil produce 2 barrels of gasoline and 1 barrel of distillate (diesel/heating oil). The formula is: (2 × Gasoline Price + 1 × Heating Oil Price) / 3 - Crude Oil Price.
What is a 2-1-1 crack spread?
The 2-1-1 crack spread assumes 2 barrels of crude oil produce 1 barrel of gasoline and 1 barrel of distillate. It's commonly used for refineries with equal gasoline and diesel output. Formula: (1 × Gasoline + 1 × Heating Oil) / 2 - Crude.
Why do refineries use crack spreads?
Refineries use crack spreads to measure profitability, hedge against price volatility, and make operational decisions. Traders use them to speculate on refining margins and identify market opportunities.
What is a good crack spread?
Historically, a healthy 3-2-1 crack spread ranges from $10-20 per barrel. During supply disruptions or high demand periods, spreads can exceed $30-40. Negative spreads indicate refineries are losing money on each barrel processed.
How often do crack spreads change?
Crack spreads change constantly during trading hours as crude oil and refined product prices fluctuate. Seasonal factors (summer driving, winter heating), refinery outages, and geopolitical events all impact spreads.
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