Crack Spread Price Today |WORK|
Crack Spread Price Today: What It Means for Oil Refiners and Consumers
If you are interested in the oil refining industry, you might have heard of the term "crack spread". The crack spread is the difference between the price of crude oil and the price of refined products, such as gasoline and heating oil. The crack spread is a measure of the profitability of oil refiners, as it indicates how much they can earn from turning crude oil into useful fuels.
The crack spread can vary depending on the type and quality of crude oil and refined products, as well as the supply and demand dynamics in the market. For example, a light sweet crude oil, such as West Texas Intermediate (WTI), is easier and cheaper to refine than a heavy sour crude oil, such as Maya. Similarly, a high-octane gasoline, such as RBOB (Reformulated Blendstock for Oxygenate Blending), is more valuable than a low-octane gasoline, such as conventional gasoline.
crack spread price today
One of the most common ways to calculate the crack spread is to use the 3-2-1 formula, which assumes that one barrel of crude oil can produce two barrels of gasoline and one barrel of heating oil. The 3-2-1 crack spread is then the difference between the price of three barrels of crude oil and the price of two barrels of gasoline and one barrel of heating oil. For example, if the price of WTI crude oil is $70 per barrel, the price of RBOB gasoline is $2.50 per gallon, and the price of heating oil is $2.20 per gallon, then the 3-2-1 crack spread is:
(2 x 42 x 2.50) + (1 x 42 x 2.20) - (3 x 70) = $50.40 - $210 = -$159.60
This means that an oil refiner would lose $159.60 for every three barrels of WTI crude oil they process into two barrels of RBOB gasoline and one barrel of heating oil.
The crack spread price today is at a historically high level, indicating that oil refiners are enjoying a strong profitability. On Tuesday, the WTI 3-2-1 crack spread touched a three-month high of $42 per barrel. This means that an oil refiner would earn $42 for every three barrels of WTI crude oil they process into two barrels of RBOB gasoline and one barrel of heating oil.
The high crack spread price today is mainly driven by the surge in demand for refined products, especially gasoline, as the global economy recovers from the pandemic. According to Bloomberg, U.S. gasoline consumption reached a record high of 9.8 million barrels per day last week. At the same time, the supply of refined products has been constrained by several factors, such as refinery outages, pipeline disruptions, environmental regulations, and labor shortages. As a result, the price of refined products has risen faster than the price of crude oil, widening the crack spread.
The high crack spread price today has implications for both oil refiners and consumers. For oil refiners, it means that they can enjoy higher margins and profits from their operations. For consumers, it means that they have to pay more for gasoline and heating oil at the pump. According to AAA Fuel Gauge Report, the average retail price for regular gasoline in the U.S. was $3.56 per gallon on Wednesday, up 0.4% from Tuesday and up 54% from a year ago.
The crack spread price today is likely to remain high in the near term, as the demand for refined products continues to outstrip the supply. However, in the long term, the crack spread price today may face downward pressure from several factors, such as increased competition from renewable fuels, improved energy efficiency, and stricter environmental regulations. Therefore, oil refiners and consumers should keep an eye on the crack spread price today and its future trends. 06063cd7f5