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Crack Spreads

The crack spread represents the theoretical refining margin. If a crack spread is a positive number then the price of the refined products is higher than that of crude oil, the raw material, and the spread is profitable. If the spread is a negative number, the products are priced at less than the cost of crude and are not profitable.

The 3-2-1 crack spread is a commonly used formula in the oil industry, expresses the theoretical margin in dollars per barrel.



					X (Heating Oil: $ per gallon x 42)



	+				X (Gasoline: $ per gallon x 42)



	minus				X (Crude Oil: $ per barrel)







	=				Crack Spread: $ per barrel