How does the crack spread work?

Key Takeaways. A crack spread is the overall pricing difference between a barrel of crude oil and the petroleum products refined from it. The price of a barrel of crude oil and the prices of the different products derived from it are not always in sync, leading to the spread in prices.

How do you calculate a 3 2 1 crack spread?

The 3:2:1 crack spread is calculated by subtracting the price of 3 barrels of oil from the price of 2 barrels of gasoline and 1 barrel of distillate. Additional ratios used for multiple-product crack spreads include 5:3:2 and 2:1:1.

How do you trade crack spreads?

Multiple product crack spreads The 3:2:1 ratio crack spread is traded by buying three barrels of crude oil futures and selling two barrels of gasoline futures and one barrel of fuel oil futures. A refiner with lower yields of gasoline relative to other distillates might use other combinations such as a 5:3:2 spread.

Why do cracks spread?

Bumpy Roads The more stress, the more likely any cracks or chips will spread. Avoid driving on bumpy roads, slamming your car door, and slamming on the brakes to minimize the impact on your windshield. If you notice a crack or chip in your windshield, get it repaired as soon as possible – before it spreads.

What is a profitable crack spread?

Refiners’ profits are tied directly to the spread, or difference, between the price of crude oil and the prices of refined products — gasoline and distillates (diesel and jet fuel). This spread is referred to as a crack spread.

What is naphtha crack?

Accordingly, it refers to a place (center) with the facilities for cracking naphtha to produce basic petrochemical feedstock. It is called the Naphtha Cracking Center or Naphtha Cracking Plant. As technology advances, not only naphtha, but also diesel (Gas Oil) and natural gas are used as feedstock to produce ethylene.

How do you stop cracks from spreading?

There are a couple of methods auto owners can try to stop or slow the spread of a windshield crack.

  1. Apply Superglue or Clear Nail Polish.
  2. Use a Windshield Repair Kit.
  3. Avoid Sudden Temperature Changes.
  4. Schedule Windshield Repair or Replacement.