Crack Spread Jumps $35 a Barrel, Lifting Refined Fuel Prices by $60

3 articles · Updated · Paul Krugman | Substack · Aug 13

$35 a barrel has been added to the crack spread since the eve of the war, leaving refined fuels about $60 a barrel above prewar levels even though Brent crude is only roughly $25 higher.
Hormuz disruptions and lost refining capacity — including facilities trapped inside the strait and outages tied to Ukraine's drone campaign against Russia — have pushed gasoline and diesel prices back near recent peaks.
That refining bottleneck has also capped crude prices, because buyers are unwilling to pay much more for oil they cannot process, shifting much of the market's rationing from crude into refined products.
U.S. consumers are already seeing gasoline above $4 and diesel above $5, pointing to firmer inflation in next month's data if the Hormuz closure persists.

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Paul Krugman | Substack7d ago

Crack Spread Explodes by $35/Barrel, Driving Refined Fuel Prices Up $60

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The crack spread is the refiner's margin: buy crude, sell gasoline and diesel. The 3-2-1 benchmark traded near $70 last month. Normal is $15 to $25, so refiners are earning triple. Crude is off its ...

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A key benchmark for refining margins has surged past $70 per barrel, well above its typical range of under $20. Refineries are running at unusually high utilisation rates to offset supply losses

With global refining capacity crippled, could plummeting crude prices still leave you paying record highs at the gas pump?

How will the hidden surge in diesel costs secretly drive up the price of your groceries and everyday deliveries?

Record Crack Spreads and the 2026 Fuel Price Anomaly: Why Oil Prices Fell but Gasoline and Diesel Soared

Overview

In the summer of 2026, a series of geopolitical shocks—most notably the war in Iran and retaliatory strikes across the Gulf—severely damaged refining capacity, removing millions of barrels per day from the global market. This led to tight refinery operations and record-high crack spreads, causing retail fuel prices to remain high even as crude oil prices fell. The resulting supply constraints, especially for diesel, triggered inflation, forced governments to release emergency oil stocks, and pushed countries to adopt protectionist and short-term energy security measures. These disruptions cascaded into higher fertilizer prices, threatened food security, and complicated central bank policies worldwide.

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