The long-term crack spread, or margin between the price of refined products and crude oil, is probably higher than the $10 a barrel (17% of crude oil price) we have in present value estimates, but the recent sharp runup to the current quote of $17 a barrel (25% of crude oil price) for the next twelve months may not be sustainable yet.

Taking perspective from a new graph, it looks like the 40-week average of crack to crude may be headed up toward 20% where it traded in 2003 (see chart One-Year Refining Crack Percent of Crude Oil Futures, below). Similarly, deviations as far from the 40-week average as we have now did not last in the past.

graphic report : click here

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