RE:RE:Crack spreads still huge / oil averaging $108 USD MarchThe crack spread is calculated by taking the futures (wholesale) price for a gallon of heating oil and multiplying by 42 (gallons in a barrel) then take the price for RBOB (Gasoline) – multiply that by 84 (number of gallons in 2 barrel units).
https://www.cmegroup.com/tools-information/calc_crack.html
Take that number and minus the wholesale price of barrel WTI multiplied by 3. So you subtract 3 barrels worth of “cracked product” from 3 barrels of unrefined oil. That is the refinery profit margin.
Refineries take oil and “crack” it into different products. It’s not always heating oil however that serves a good proxy for the calculation.
Yesterday crack spread was around $40. It’s been as high as $60. Usually $20 is high and it’s not unusual to see spreads even under $10 at times.