What Is a 3-2-1 Crack Spread? The Practitioner's Guide to Refining Margins

The 3-2-1 crack spread is the single most-watched number in petroleum refining. It tells you, in one figure, whether a refinery is making money or bleeding it. If you work in fuel retail, trade energy commodities, or analyze refining stocks, understanding crack spreads is non-negotiable.

Here's the short version: a crack spread measures the gap between what a refinery pays for crude oil and what it gets for the gasoline and diesel it produces. The "3-2-1" refers to the ratio — 3 barrels of crude in, 2 barrels of gasoline and 1 barrel of diesel out. That ratio roughly matches the yield of a typical U.S. conversion refinery.

When the spread is wide (above $20/bbl), refiners are printing money. When it compresses below $10/bbl, margins are thin and some operators start losing on variable costs. Everything from seasonal driving demand to hurricane shutdowns to OPEC production cuts moves this number.

How the 3-2-1 Crack Spread Is Calculated

The formula is straightforward:

All prices need to be in the same unit — dollars per barrel. Since gasoline and diesel futures trade in dollars per gallon, you multiply by 42 (gallons per barrel) to convert.

Worked Example With Live Prices

Using the latest futures data from FuelSignal (2026-02-24):

That $32.30 per barrel is the gross refining margin before operating costs. A refinery processing 200,000 barrels per day at this spread generates roughly $6,460,000 in daily gross margin.

Types of Crack Spreads

The 3-2-1 is the headline number, but it isn't the only one worth tracking.

Single-Product Cracks

Gasoline crack (RBOB minus WTI) isolates the gasoline leg. It widens during summer driving season (May through September) as demand climbs, and compresses during shoulder months. Typical range: $8-20/bbl.

Diesel crack (ULSD minus WTI) isolates the distillate leg. Diesel cracks tend to run higher and more volatile than gasoline, spiking during cold snaps when heating oil demand surges, or when freight activity accelerates. Typical range: $12-30/bbl.

The 2-1-1 and 5-3-2

Different regions use different ratios. Gulf Coast refineries producing more diesel relative to gasoline might reference the 2-1-1 (2 crude in, 1 gasoline, 1 diesel). West Coast refineries with complex coker units sometimes use the 5-3-2 (5 crude, 3 gasoline, 2 diesel). The 3-2-1 remains the default benchmark because it approximates the average U.S. refinery yield.

Why Crack Spreads Matter Beyond the Trading Desk

Crack spreads aren't just a futures trading metric. They ripple through the entire fuel value chain:

Refinery operators use them to decide whether to run hard or throttle back. When spreads compress below variable costs (~$5-8/bbl depending on the plant), refineries schedule maintenance turnarounds. When spreads widen, every operable barrel gets processed.

Fuel retailers watch crack spreads as a leading indicator of wholesale price moves. A widening gasoline crack today usually shows up as higher rack prices within days, squeezing retail margins if pump prices don't adjust.

Refining stock analysts model quarterly earnings directly from crack spread averages. Companies like Valero, Marathon Petroleum, and Phillips 66 report "capture rates" — what percentage of the benchmark crack spread their refineries actually capture after accounting for crude quality differentials, transportation costs, and product slate differences.

Regulators and policymakers monitor crack spreads when investigating whether pump prices are "fair." Wide crack spreads during supply disruptions often trigger congressional scrutiny, even though the spread is a market signal, not a markup.

Seasonal Patterns That Move Crack Spreads

Crack spreads follow a predictable seasonal rhythm, though the magnitude varies year to year:

February-April (turnaround season): Refineries take units offline for scheduled maintenance ahead of summer. Reduced output tightens product supply and widens spreads, even though demand is still soft.

May-September (driving season): Gasoline demand peaks. The gasoline crack typically widens $3-5/bbl above its winter level. Diesel cracks may narrow slightly as heating demand fades.

October-November (shoulder season): Gasoline demand falls, and refineries may run brief fall turnarounds. Spreads often compress to their annual lows here.

December-January (heating season): Diesel and heating oil demand rises. Diesel cracks strengthen, pulling the 3-2-1 wider. Cold snaps can cause sharp spikes — the polar vortex events of recent years pushed diesel cracks above $40/bbl briefly.

What Moves Crack Spreads: The Key Drivers

Beyond seasonal patterns, several structural forces push spreads wider or narrower:

Refinery outages — unplanned shutdowns from fires, equipment failures, or hurricanes remove capacity from the market fast. Hurricane Harvey in 2017 knocked out roughly 25% of U.S. refining capacity and sent the 3-2-1 above $30/bbl. Every hurricane season is a catalyst for spread volatility in the Gulf Coast.

Crude quality differentials — lighter, sweeter crudes yield more gasoline per barrel, which affects the actual margin a refinery captures versus the benchmark spread. Heavy sour crude discounts can widen actual margins even when the WTI-based crack spread looks modest.

Global capacity additions — new mega-refineries in the Middle East and Asia (like Saudi Arabia's Jazan and Kuwait's Al Zour) add product supply to global markets, which can compress crack spreads for U.S. refiners, especially on the export side.

Inventory levels — EIA weekly inventory reports for crude, gasoline, and distillates are the most market-moving data points. Unexpected draws tighten supply and widen spreads. Builds have the opposite effect.

Utilization rates — U.S. refinery utilization typically runs 85-95%. Drops below 85% usually mean either turnaround season or unplanned outages, both of which tighten product supply.

What Crack Spreads Don't Tell You

The 3-2-1 is a useful approximation, but it has real blind spots:

Operating costs aren't included. The spread is a gross margin figure. Variable costs (energy, catalysts, chemicals, labor) run $3-8/bbl depending on the refinery. Fixed costs add more. A $10/bbl crack spread sounds reasonable until you subtract $6-8 in costs.

Product slate varies. No refinery produces exactly 2 barrels of gasoline and 1 barrel of diesel from 3 barrels of crude. Complex refineries produce jet fuel, petrochemical feedstocks, asphalt, and other products. The 3-2-1 ignores these revenue streams and cost differences.

Crude basis matters. The benchmark uses WTI, but many Gulf Coast refineries run heavy Canadian or Latin American crude at significant discounts to WTI. Their actual feedstock cost is lower, so their real margin is wider than the WTI-based spread suggests.

Location differentials exist. A Gulf Coast refinery, a Midwest refinery, and a West Coast refinery face different crude costs, product prices, and transportation economics. Regional crack spreads (like the Brent-based European crack) can diverge significantly from the WTI-based U.S. benchmark.

How to Track Crack Spreads

You have several options depending on how much detail you need:

CME Group publishes crack spread futures contracts and provides a crack conversion calculator for quick estimates.

EIA publishes weekly spot prices for WTI, RBOB, and ULSD that you can plug into the formula yourself. Their crack spread explainer provides historical context.

FuelSignal computes the 3-2-1 crack spread, gasoline crack, and diesel crack automatically from daily futures data and displays them with 90-day trend sparklines on the Market Data page. Spreads update with each ingestion run, so you always see the latest values without manual calculation.

Reading the Current Market

The current 3-2-1 crack spread is $32.30/bbl as of 2026-02-24. That's a healthy margin — above $20/bbl means refiners are operating comfortably and have incentive to maximize throughput.

Industry forecasters expect tight global refinery utilization rates through 2026, with capacity growth lagging product demand growth. That supply-demand imbalance tends to support elevated crack spreads, particularly on the diesel side where European demand continues to draw on U.S. exports.

The key wildcards remain the same as always: hurricane season disruptions in the Gulf Coast, the pace of new mega-refinery startups in the Middle East, and whether EV adoption materially dents gasoline demand growth in the near term.

Frequently Asked Questions

What is a good crack spread?

Above $20/bbl is strong — refiners are clearly profitable and typically running at high utilization. Between $10-20/bbl is moderate and sustainable for most operators. Below $10/bbl indicates pressure, and some refineries may defer runs or accelerate maintenance.

Can crack spreads go negative?

In theory, yes — if crude prices spike while product prices lag. In practice, negative crack spreads are rare and short-lived because refineries respond by cutting throughput, which tightens product supply and pushes spreads back up.

How often do crack spreads change?

Continuously during trading hours. Futures-based crack spreads update tick by tick. Spot-based calculations (using EIA data) update daily or weekly depending on the data series. FuelSignal updates spreads with each data ingestion cycle.

What's the difference between a crack spread and a refining margin?

A crack spread is a market-based estimate of gross refining margin using benchmark prices. An actual refining margin accounts for the specific crude slate, full product yield, operating costs, and transportation economics of a particular refinery. Crack spreads are directionally accurate but always an approximation.

Why do analysts watch crack spreads for refining stocks?

Because refining is a spread business — profitability depends on the gap between input costs and output prices, not on the absolute level of oil prices. A refiner can be highly profitable at $50 crude with a $25 crack spread, and struggling at $80 crude with a $5 spread. Quarterly earnings for companies like Valero (VLO), Marathon Petroleum (MPC), and PBF Energy (PBF) correlate closely with average crack spreads during the quarter.