Crack Spread Calculator
The crack spread measures the theoretical profit margin a refinery makes from buying crude oil and "cracking" it into refined products like gasoline and heating oil.
3-2-1 Crack Spread
Theoretical 3-2-1 Margin
$0.00
/ barrel
Formula:
((Gasoline * 42 * 2) + (Heating Oil * 42 * 1) - (Crude * 3)) / 3
((Gasoline * 42 * 2) + (Heating Oil * 42 * 1) - (Crude * 3)) / 3
Understanding the 3-2-1 Spread
The 3-2-1 crack spread is the industry benchmark. It assumes that for every three barrels of crude oil processed, a typical U.S. refinery produces two barrels of gasoline and one barrel of distillate (heating oil/diesel).
Because crude oil is priced in dollars per barrel, but gasoline and heating oil are priced in dollars per gallon on the NYMEX, you must multiply the product prices by 42 (the number of gallons in a barrel) to normalize the units.
Why Traders Care
- Refinery Margins: If the crack spread widens, refining is highly profitable, which usually leads to increased crude demand (as refiners ramp up runs) and potential oversupply of refined products.
- Hedging: Refiners go "long the crack" by buying crude futures and selling product futures to lock in their margin.
- Seasonality: The crack spread exhibits strong seasonality, often widening ahead of the summer driving season as gasoline demand expectations rise.