A crack spread is the difference between the price of refined products and the crude oil used to make them. It is the cleanest single proxy for refining margin and is quoted in $/bbl.
Common variants
- 3-2-1 crack: 3 bbl of crude → 2 bbl gasoline + 1 bbl distillate. The standard US benchmark.
- 5-3-2 crack: 5 bbl crude → 3 bbl gasoline + 2 bbl distillate. Used for heavy-distillate slates.
- Single-product cracks: Gasoil-Brent, ULSD-Brent, jet-Brent, etc. — used by product traders to isolate one cut's strength.
- Regional differentials: ICE Gasoil vs. Brent (Europe), RBOB vs. WTI (US), Singapore gasoil vs. Dubai (Asia).
How traders use it
Refiners hedge cracks to lock in margin. Product traders watch the crack as a demand thermometer: when distillate cracks rip, it often means industrial activity or weather is pulling diesel and heating oil hard. When gasoline cracks weaken into autumn, summer driving demand is fading.
On NetbackBeacon, regional cracks feed directly into the Distillates Intelligence module and are layered into every netback calculation, so you see the refiner-side economics behind the trade.
Pitfalls
- Cracks ignore feedstock differentials — a complex refiner running discounted heavy crude can earn far more than the headline crack suggests.
- The 3-2-1 is a futures construct — actual yields differ by refinery configuration.
- Local taxes, biofuel mandates and quality specs (sulphur, RVP) can distort regional comparisons.