Crack Spread Hits Record High, Fueling Oil Company Profits
The record profits of oil companies may seem counterintuitive given the high price of crude oil. However, it's not just the price of crude that's driving these profits, but also the increasing profit margin refiners are making on top of it.
The crack spread, which is the gap between the cost of crude oil and what refined products sell for, has grown significantly in recent months. According to the U.S. Energy Information Administration, the historic spread has run around $15 to $20 for diesel and $10 to $15 for gasoline.
The numbers have shot up in recent months, especially for diesel, with Reuters reporting that the diesel crack spread hit a record $108 a barrel in August. This is due in part to drone strikes that have damaged refineries in Russia and the closure of the Strait of Hormuz, which has limited Middle East refineries' ability to export their product.
The result is a shortage of diesel and gas, leading to rising prices and record profits for oil companies. Reuters reports that three refiners - Marathon Petroleum, Phillips 66, and Valero Energy - earned a combined $12.6 billion in profit last quarter, while Exxon Mobil's profits doubled to $14.53 billion.