Crack spread
The margin between crude oil and refined products, a proxy for refinery profitability; the 3-2-1 spread is a common version.
A crack spread is the difference between the price of refined products, such as gasoline and diesel, and the price of the crude oil used to make them. The 3-2-1 crack assumes three barrels of crude yield two barrels of gasoline and one of diesel. It is a rough measure of refining margin.
Refiner earnings move with crack spreads, and regional differences matter. Actual yields vary by refinery, so the 3-2-1 figure is a benchmark rather than a measured margin. Traders care because wide cracks encourage refiners to run harder, which raises crude demand, while narrow cracks can cut runs.
Worked example (illustrative numbers, not real data): gasoline at 2.50 dollars per gallon, diesel at 2.80 and crude at 75 dollars per barrel, with 42 gallons per barrel. The 3-2-1 product value is (2 × 42 × 2.50 + 1 × 42 × 2.80) divided by 3, or 109.20 dollars per barrel of crude. The crack is 34.20 dollars.