Glossary
Crack spread
The price gap between crude oil futures and refined product futures like gasoline, used to gauge refining profit margins.
The crack spread is the price difference between crude oil and the refined products made from it, most commonly gasoline and heating oil or diesel, expressed in futures markets. It approximates the gross margin a refiner earns for "cracking" crude into finished products, before accounting for operating costs.
The most quoted version is the 3-2-1 crack spread, which compares the value of 3 barrels of crude oil against 2 barrels of gasoline and 1 barrel of heating oil, roughly spread = (2×gasoline + 1×heating oil) - 3×crude, scaled to per-barrel terms. Other ratios, such as 5-3-2, are used depending on a refinery's actual product mix. This differs from reading a single futures curve in contango and backwardation, which describes price differences across delivery dates for one product rather than the margin between crude and its outputs.
Refiners, traders, and analysts use the crack spread to gauge refining profitability, hedge margin risk by trading crude and product futures together, and infer market expectations about fuel supply relative to crude supply. A common pitfall is treating it as a precise real-world margin: actual refinery economics vary by plant configuration, product slate, and location, so the quoted spread is only an industry-standard approximation.
Last reviewed September 22, 2026