# Crack Spreads

> The crack spread measures the margin between crude oil and refined products like gasoline and diesel. Learn the 3:2:1 spread, how to calculate it and who trades it.

Source: https://learn.tradelabsai.com/futures/crack-spreads/  
Track: Futures · Level: Advanced · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Crack Spreads", https://learn.tradelabsai.com/futures/crack-spreads/

A crack spread is the difference between the price of crude oil and the prices of the products refined from it, mainly gasoline and diesel (heating oil). The name comes from "cracking", the refining process that breaks crude into lighter products. The crack spread approximates a refinery's gross profit margin. Refiners use crack spread futures to lock in margins, and traders use them to bet on refining economics, fuel demand and supply disruptions.

## The basic idea

Refiners buy crude oil and sell gasoline and diesel. Their margin depends on the gap between input and output prices, not on the oil price level itself. A refiner that is long crude (buying) and short products (selling) is exposed to the crack spread.

## Units

Crude oil is quoted in dollars per barrel; NYMEX gasoline (RBOB) and heating oil (ULSD) are quoted in dollars per gallon. There are 42 gallons in a barrel, so product prices are multiplied by 42 to compare.

```
product price per barrel = price per gallon × 42
```

## Common crack spreads

| Spread | Ratio | Represents |
|---|---|---|
| 3:2:1 | 3 crude : 2 gasoline : 1 heating oil | A typical US refinery's output mix |
| 2:1:1 | 2 crude : 1 gasoline : 1 heating oil | A different product slate |
| 1:1 gasoline crack | 1 crude : 1 gasoline | Gasoline margin only |
| 1:1 heating oil crack | 1 crude : 1 heating oil | Diesel and distillate margin |

## Worked example

**Example: Calculating a 3:2:1 crack spread**
WTI crude: $78.00 per barrel. RBOB gasoline: $2.40 per gallon ($100.80 per barrel). ULSD heating oil: $2.70 per gallon ($113.40 per barrel).

Value of products from 3 barrels of crude: 2 × $100.80 + 1 × $113.40 = $315.00.
Cost of 3 barrels of crude: 3 × $78.00 = $234.00.
3:2:1 crack spread = (315.00 minus 234.00) / 3 = $27.00 per barrel.

A refiner could lock in this margin by buying 3 crude futures and selling 2 RBOB and 1 ULSD futures. If crude rises and product prices rise by the same amount per barrel, the margin stays $27.

## What moves crack spreads

| Factor | Effect |
|---|---|
| Strong fuel demand (summer driving, winter heating) | Widens cracks |
| Refinery outages (hurricanes, fires, maintenance) | Widens cracks, as product supply falls |
| New refining capacity | Narrows cracks |
| Weak economy | Narrows cracks |
| Low product inventories | Widens cracks |
| Export demand | Can widen US cracks |

In 2022, after Russia's invasion of Ukraine disrupted diesel supplies, diesel crack spreads rose to historically high levels. Hurricane related Gulf Coast refinery outages have also caused sharp jumps in gasoline cracks. See [Energy Markets](https://learn.tradelabsai.com/commodities/energy-markets/) and [Gasoline and Heating Oil](https://learn.tradelabsai.com/commodities/gasoline-and-heating-oil/).

## Who trades crack spreads

- **Refiners** hedge margins, often selling crack spreads when margins are high.
- **Airlines and trucking firms** hedge fuel costs against crude.
- **Speculators** trade views on demand, outages and seasonal patterns.
- **Arbitrageurs** link crack spreads across regions, such as US Gulf Coast and Europe.

## Reverse crack

Selling crude and buying products, the reverse crack, profits if refining margins narrow. Traders use it when they expect product inventories to build or demand to weaken.

## Trading crack spreads

CME lists crack spread contracts and allows the legs to be traded as a single spread with margin benefits. Traders still need to watch:

- **Different expiries:** crude and product contracts expire on different schedules. See [Contract Months and Expiration](https://learn.tradelabsai.com/futures/contract-months-and-expiration/).
- **Seasonal specifications:** gasoline blends change between summer and winter grades, which affects RBOB spreads.
- **Regional differences:** WTI based cracks differ from Brent based cracks.

## Frequently asked questions

### What is a crack spread?

The difference between the price of crude oil and the prices of refined products such as gasoline and diesel, representing refining margins.

### What is a 3:2:1 crack spread?

A spread using 3 barrels of crude against 2 barrels of gasoline and 1 barrel of heating oil, approximating a typical refinery's output.

### Why do crack spreads widen?

Usually because of strong fuel demand, refinery outages or low product inventories, which push product prices up relative to crude.

Next, learn the soybean processing spread in [Crush Spreads](https://learn.tradelabsai.com/futures/crush-spreads/).

## Continue learning

- Next lesson: [Crush Spreads](https://learn.tradelabsai.com/futures/crush-spreads/)
- Previous lesson: [Calendar Spreads in Futures](https://learn.tradelabsai.com/futures/calendar-spreads-in-futures/)
- Related: [Calendar Spreads in Futures](https://learn.tradelabsai.com/futures/calendar-spreads-in-futures/): A futures calendar spread buys one contract month and sells another. Learn bull and bear spreads, what moves them, seasonality and a worked crude oil example.
- Related: [Crude Oil](https://learn.tradelabsai.com/commodities/crude-oil/): Crude oil is the world's most traded commodity. Learn WTI vs Brent, the futures contracts, OPEC+, shale, inventory reports and how traders approach oil.
- Related: [Gasoline and Heating Oil](https://learn.tradelabsai.com/commodities/gasoline-and-heating-oil/): RBOB gasoline and ULSD heating oil futures track refined fuel prices. Learn the contracts, what drives them, seasonal patterns, crack spreads and who trades them.
- Related: [Futures Spreads Explained](https://learn.tradelabsai.com/futures/futures-spreads-explained/): Futures spreads buy one contract and sell a related one. Learn calendar, inter market and inter commodity spreads, margin benefits, quoting and worked examples.
- Related: [Crush Spreads](https://learn.tradelabsai.com/futures/crush-spreads/): The soybean crush spread measures the margin between soybeans and the meal and oil made from them. Learn the calculation, board crush, reverse crush and drivers.
- Related: [Energy Markets](https://learn.tradelabsai.com/commodities/energy-markets/): Energy markets cover crude oil, natural gas, refined products and power. Learn the benchmarks, how they connect, what drives prices and how energy is traded.