What is a crack spread and why should we be worried about it?
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Oil prices have ebbed and flowed this summer with each new twist in the Iran war, but products made from crude — the fuels that run our world — have marched steadily higher.
Gas and diesel prices decoupled from crude in July, limiting any relief from lower oil prices, and according to economists, they are likely to stay high, even after oil starts flowing again through the Strait of Hormuz.
Why are oil product prices rising more than oil itself? That has to do with something called a “crack spread” and a series of supply disruptions that are uniquely putting the squeeze on oil product markets.
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BofA Global Research describes it as a “perfect summer storm.”
“Three of the world’s four major refining hubs remain impaired for one reason or another,” said strategists in recent note.