What is Crack Spread?
Crack Spread meaning (1) In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin. One can trade a gasoline crack spread, a heating oil crack spread, or a 3-2-1 crack spread which consists of three crude oil futures contracts spread against two gasoline futures contracts and one heating oil futures contract. The 3-2-1 crack spread is designed to approximate the typical ratio of gasoline and heating oil that results from refining a barrel of crude oil. See Gross Processing Margin. (2) Calculation showing the theoretical market value of petroleum products that could be obtained from a barrel of crude after the oil is refined or cracked. This does not necessarily represent the refining margin because a barrel of crude yields varying amounts of petroleum products.