The Smoking Crack Spread


(Global Macro Monitor) Right now, the traditional relationship between crude and refined products is broken. WTI is anchored around $100-$110 a barrel, suggesting that — in barrel terms — gasoline, diesel and jet-fuel prices shouldn’t be much higher, once you add the average refining margin. 

In reality, they are a lot more expensive. Take jet-fuel: in New York harbor, a key hub, it’s changing hands at the equivalent to $275 per barrel. Diesel isn’t far away, at about $175 a barrel. And gasoline is at about $155 a barrel. Those are wholesale prices, before you add taxes and marketing margins. 

…Oil refineries are complex machines, capable of processing multiple streams of crude into dozens of different petroleum products. For simplicity’s sake, the industry measures refining margins using a rough calculation called the “3-2-1 crack spread”: for every three barrels of WTI crude oil the refinery processes, it makes two barrels of gasoline and one barrel of distillate fuel like diesel and jet-fuel. 

From 1985 to 2021, the crack spread averaged about $10.50 a barrel. Even between 2004 and 2008, during the so-called golden age of refining, the crack spread never surpassed $30. It rarely spent more than a few weeks above $20. Last week, however, the margin jumped to a record high of nearly $55. Crack margins for diesel and other petroleum products surged much higher. 

From 1985 to 2021, the crack spread averaged about $10.50 a barrel. Even between 2004 and 2008, during the so-called golden age of refining, the crack spread never surpassed $30. It rarely spent more than a few weeks above $20. Last week, however, the margin jumped to a record high of nearly $55. Crack margins for diesel and other petroleum products surged much higher.  – Bloomberg

Source: Global Macro Monitor


The Economy and Markets

5/26  Labor market weakens as jobless claims hold near 4-month highs – Zero Hedge
5/26  US economy contracted more than expected in Q1, raising recession odds – ZH
5/26  El-Erian: Fed not stepping in anytime soon – Sounding Line
5/26  David Rosenberg sees bear market sinking the S&P to 3,300 – MarketWatch
5/26  CEO pay up 17% as profits, stocks soar; workers fall behind – AP
5/26  CBO boosts U.S. GDP growth estimates, says inflation has topped – CNBC
5/26  Davos: Financiers met up in the Swiss Alps, and the mood was terrible – CNBC
5/26  China holds an unprecedented massive videoconference on its economy – CNBC
5/26  Buffett’s gain of $1.9 billion on Snowflake now a loss of $37 million – WS
5/26  Recession coming? Market says it may be here. – Real Investment Advice
5/25  Fed minutes show inflation risks are skewed to the upside – Mish Talk
5/25  Why the stock market fools investors – Elliott Wave International
5/25  US middle class shutting down, but spending by rich remains robust – ZH
5/25  Snap goes the economy – Real Investment Advice
5/25  US durable goods orders disappoint in April – Zero Hedge
5/25  Glencore pleads guilty to decade of bribery and market manipulation – ZH
5/25  Tech leads stock rebound ahead of Fed minutes – Yahoo!
5/25  Very serious economic problems as stock market tests recent lows – KWN
5/25  Tightening into a popped bubble is insane: gold, inflation and housing – KWN

Real Estate Bubble

5/26  Foreclosure wave sweeping US crests in Chicago – Courthouse News
5/26  US pending home sales plunge to weakest since 2014 – Zero Hedge
5/26  Bank of Canada chief ‘intentionally’ caused housing inflation – Kitco
5/25  The air is coming out of the housing bubble – Schiff Gold
5/25  Mortgage demand slides further as interest rates pull back slightly – CNBC

Precious Metals and Mining Stocks

5/26  Gold price still on pace to push above $2,000 as stagflation, recession risks rise – Kitco
5/26  Gold update video: Bulls are in control – GoldSeek
5/26  Gold falls as dollar inches higher; Fed minutes no surprise – Reuters
5/26  Zimbabwe used gold, platinum to secure credit – Bloomberg
5/26  Gold slides below the $1850 mark in quiet trading – USAgold
5/26  Gold bulls are capitulating – King World News
5/25  Gold update: The bull knocked traders off at the bottom again – GoldSeek
5/25  Gold prices fall on dollar strength; Fed minutes in focus – Reuters
5/25  Royal Mint unveils its largest coin for queen’s platinum jubilee – Yahoo!
5/25  Gold takes a breather after six straight days of gains – USAgold

Monetary Madness, Cryptos & Currency Wars

5/26  JPMorgan says Bitcoin is 25% ‘undervalued’, Terra FUD overdone – ZH
5/26  Ruble slides from 4-year-high on Russian rate-cut – Zero Hedge
5/25  The art of currency wars in the Ukraine war – Arab News
5/25  Russia intends to repay foreign debt in rubles after US ends exemption – NDTV
5/25  Fed’s balance-sheet unwind puts treasuries on ‘uncertain’ path – Yahoo!
5/25  Russia to service debt in rubles after US closes loophole – Yahoo!

Sanctions, Shortages & Supply Shocks

5/26  One-billion people are at risk of rolling blackouts this summer – Oil Price
5/26  US allows 2-million baby formula cans in from UK, lets Abbott release 300,000 – ZH
5/26  World has just 10 weeks’ worth of wheat left after Ukraine war – Telegraph
5/26  White house advisors had secret meeting with Saudi Arabia to discuss energy – Oil Price
5/26  Iranian-Russian ‘oil smuggling’ network hit with U.S. sanctions – Oil Price
5/26  Russia’s oil production has plunged even as its revenue climbs – Oil Price
5/26  UK hits oil & gas companies with 25% windfall tax – Oil Price
5/26  Russia slams sanctions, seeks to shift blame for food crisis – AP
5/25  Global food crisis looms as fertilizer supplies dwindle – MSN
5/25  UK braces for internet “blackouts” due to “wave of bankruptcies” – Zero Hedge
5/25  One billion people at risk of power blackouts as global grids stretched – ZH
5/25  Food protectionism spreads: India limits sugar, Malaysia halts chicken – ZH
5/25  Gov Newsom warns Californians of water restrictions, worsening drought – ZH
5/25  U.S. travels to India to talk about Russian oil purchases – Oil Price
5/25  Stupid government rules create a pilot shortage – Stossle

FED-up & Underfed: Inflation from Too Much Money & Too Few Goods

5/26  Mid-East oil producers to cut prices as extreme backwardation eases – OP
5/26  Overdue reality check for Fed and markets has barely begun – Financial Times
5/26  Leaders brace for economic downturn – King World News
5/26  Fed minutes: Monetary policy may move into restrictive territory – CNBC
5/25  US natural gas futures spiked to highest since 2008 – Wolf Street
5/25  Peter Schiff eviscerates Ross Gerber: “You’re living in a fantasy land” – QTR
5/25  Supply woes raise recession risk as Fed rejects inflation nuance – Yahoo!
5/25  U.S. natural gas prices hit $9 for the first time since 2008 – Oil Price

War and Civil Unrest

5/26  Putin authorizes Russian citizenship for occupied Ukrainian territories – ZH
5/26  Ukraine to get more armored personnel carriers from Lithuania – Defense Blog
5/26  Russian troops plunge through Ukraine lines in Donbas – Military Times
5/26  Poland requests six additional patriot batteries from US – Defense News
5/26  Russia to open sea corridors from Ukraine ports amid wheat crisis – ZH
5/26  Japan, emboldened by Biden and wary over Ukraine, gets tough on China – MSN
5/26  Ukraine latest: US envoy warns of Russian attack ‘springboard’ – Yahoo!
5/25  George Soros: Ukraine invasion may be start of ‘third world war’ – Guardian
5/25  China wants 10 Pacific nations to endorse sweeping Pacific pact – AP
5/25  China follows Biden remarks by announcing Taiwan military drills – MSN

Cyberwar, Cyberterrorism and Cybercrime

5/25  Winning the tech battle with China – Washington Examiner
5/25  Cyber warfare in Ukraine – Federal News Network
5/24  Has the Ukraine-Russia conflict weaponized cybercrime? – Toolbox
5/24  Ransomware hackers declare total war on Costa Rica – National Interest
5/20  The internet crime business is booming – Zero Hedge

Politics, Authoritarianism and Censorship

5/26  Report shows FBI spied on 3.3 million Americans without warrant – Epoch Times
5/26  UAE Minister: Serious crime in metaverse should be outlawed by U.N. – CNBC
5/26  Davos reveals building blocks for “green” social credit system – OffGuardian
5/25  Mike Rowe says Feds revoked film permit because of his politics – Zero Hedge
5/25  Trump foretells ‘vengeance’ on the political horizon – Yahoo!
5/25  Trump faced biggest test since 2020 in Georgia – NBC News

Covid Craziness and Now a Pox Upon Us

5/26  The NHS just edited their monkeypox page … to make it scarier – OffGuardian
5/26  Virologists warn monkeypox has become a “hyper-mutated virus” – Snyder
5/26  Research funded by Fauci, Gates could see bird flu as next pandemic – Natural News
5/26  Monkeypoxmania – Consent Factory
5/26  Viruses on hiatus during Covid are back and behaving unusually – Stat News
5/26  Bill Gates lays out plan for global takeover – Mercola
5/25  New WHO report once again proves Sweden right! – Substack
5/25  Moderna: ‘Throwing 30 Mil. doses in garbage because nobody wants them’ – ZH

Self-Reliance, Health and Prepping for Survival

5/26  COVID lessons & lockdown life in a vacuum – More Than Just Surviving
5/26  An herb patio garden. One small sage plant is plenty – part 1 – Survival Blog
5/26  Patio herbs, spices, peppers, and tomatoes – part 2 – Survival Blog
5/26  How I will choose an area before moving to the American redoubt – SB
5/25  350 legend vs. 30-30: Which hunting legend prevails? – Zero Hedge
5/25  Liberty gardens – AIER
5/25  Wild meat markets – AIER

The Art of Collapse

5/25  Top-10 benefits of putting all your money into gold – Babylon Bee
5/24  Goodbye, my love, goodbye – Caitlin Johnstone
5/22  JP Sears: Woke consultants helping your business go broke! – YouTube
5/21  Along for the pride with LGBTQs by Bill Maher – YouTube
5/20  This should make you very angry – Russel Brand
5/19  Surviving apocalypse proportional to how much you buy from conservatives – BB

Weird-and-Wacky or Off-Topic News

5/26  U.S. stops controlled burns nationwide after New Mexico disaster – MSN
5/26  Worlds youngest country, hidden inside USA – Destination Adventure
5/25  NOAA: No shortage of Atlantic hurricanes, 3-6 major expected – Zero Hedge
5/24  Check out the parking lot at Davos climate-change conference – Market Sanity