Crack Spread.
In plain English
The crack spread is the difference between what a refinery pays for crude oil and what it gets for the refined products it makes, mainly gasoline and diesel. The name comes from cracking, the process of breaking crude into lighter fuels. A wide crack spread means refining is very profitable and encourages refineries to run hard; a narrow one squeezes them. Because it drives how much gasoline refineries want to produce, the crack spread is a key link between crude prices and pump prices.
01Why it matters
The crack spread explains why gasoline prices can rise even when crude is flat: when refining margins widen, the cost shows up at the pump.
02The math, step by step
Crude costs a refiner 80 dollars a barrel, and the gasoline and diesel it yields sell for the equivalent of 100 dollars. The 20 dollar crack spread is the refiner's gross margin on that barrel.
03What this is NOT
The crack spread is NOT the pump price. It is the refiner's margin between crude and refined products, one of several layers that add up to what you pay.