US refining crack spreads are climbing again
They’re still way off their 2022 and 2023 peaks, but they’re on a nice winning streak here
US refineries are getting some much needed help as an important market measure of their profitability continues to expand.
In this post, we’ll talk about the crack spread, a measure of the difference in price between the gasoline and diesel that refineries produce relative to the price of the crude oil that refineries purchase.
This spread is an important measure of the profitability of the refining industry.
Specifically, we’ll look at the US 3-2-1 Gulf Coast crack spread, where we’re adding the prices of two barrels of gasoline and one barrel of diesel on the Gulf Coast, subtracting the price of three barrels of crude oil, and then dividing the result by three.
(We use that formula because at the highest level, a refinery produces approximately two-thirds of a barrel of gasoline and one-third of a barrel of diesel for each barrel of crude oil.)
Crack spreads had a truly historic run in 2022, peaking over $60 per barrel as crude oil prices climbed past $100.
Today spreads are just above $20, but that’s still a historically high level, as we’ll see in the charts in this post.
We’ll start this post by taking a quick journey through the crack spreads themselves.
Then we’ll explore the capacity of the US refining sector, noting how it’s changed over recent years, and show how refineries are leaning into today’s expanded spreads by ramping up their utilization.
US refinery crack spreads are climbing again after a two-year decine
US crack spreads are notoriously volatile. And the post-COVID ride has been particularly wild.
In the chart below, we’re looking at the US 3-2-1 Gulf Coast crack spread going back to 2006. The volatility jumps off the page.
