Posted by dodgerdog on 6th of Aug 2008 at 06:51 pm
Very simple for refiners - the benefit when the crack spread
improves which is the difference between input costs (cost of Crude
Oil) and output revenue (selling prices of refined
product).
The "crack spread" takes into account the price of gasoline,
whether falling, rising or staying relatively the same: it's
the difference between the cost of crude oil and the gasoline that
is refined from it. The crack spread thus has a major impact
on refiners profit margins, and thus on their earnings. Sales
volume is also important, as declining sales has the reverse effect
on earnings as a rising crack spread has. This oversimplifies
it of course: refiners have various spreads between their
crude oils and refined products since their are various kinds of
crudes, such as sweet and sour, which sell at different prices
and various kinds of refined products, such as gasoline, jet fuel,
diesel, heating oil, etc., which sell at different prices.
Posted by drorlando on 6th of Aug 2008 at 05:33 pm
It is called the Crack Spread. Refiners charge more for
gas, but they pay more for Crude. Therefore their profit per
gallon produced is lower. If they kept the spread the same
(profit) Congress would get on their Butt, plus it would drive
demand down more...therefore as crude price drops (to a point)
crack spread and profits increase. The key here is to a
point, once crude drops too much, then profits drop for obvious
reasons.
Refiners
Posted by glennsexton on 6th of Aug 2008 at 05:28 pm
Could someone please explain why refiners do better when oil prices go down?
Thanks
Very simple for refiners -
Posted by dodgerdog on 6th of Aug 2008 at 06:51 pm
Very simple for refiners - the benefit when the crack spread improves which is the difference between input costs (cost of Crude Oil) and output revenue (selling prices of refined product).
Refiners
Posted by bosscanuck on 6th of Aug 2008 at 10:40 pm
Yes, but isn't the price of gasoline, etc... falling as well?
Crack Spreads, etc.
Posted by martin on 6th of Aug 2008 at 11:00 pm
The "crack spread" takes into account the price of gasoline, whether falling, rising or staying relatively the same: it's the difference between the cost of crude oil and the gasoline that is refined from it. The crack spread thus has a major impact on refiners profit margins, and thus on their earnings. Sales volume is also important, as declining sales has the reverse effect on earnings as a rising crack spread has. This oversimplifies it of course: refiners have various spreads between their crude oils and refined products since their are various kinds of crudes, such as sweet and sour, which sell at different prices and various kinds of refined products, such as gasoline, jet fuel, diesel, heating oil, etc., which sell at different prices.
Crack Spreads
Posted by wondernut98 on 6th of Aug 2008 at 11:14 pm
In our company we usually discuss Crack Spreads but it about the various plummers that come in to do repairs.
Crack Spread
Posted by drorlando on 6th of Aug 2008 at 05:33 pm
It is called the Crack Spread. Refiners charge more for gas, but they pay more for Crude. Therefore their profit per gallon produced is lower. If they kept the spread the same (profit) Congress would get on their Butt, plus it would drive demand down more...therefore as crude price drops (to a point) crack spread and profits increase. The key here is to a point, once crude drops too much, then profits drop for obvious reasons.
Thanks!
Posted by glennsexton on 6th of Aug 2008 at 05:42 pm
Thanks!