Refineries buy crude and sell gasoline and diesel. The crack spread reproduces that economics with futures: short crude, long products. The conventional 3-2-1 crack uses three crude contracts against two rbob-gasoline and one heating-oil, roughly matching a US refinery's yield.
Crude is quoted in dollars per barrel while products are quoted in dollars per gallon, so every crack calculation starts by multiplying the product price by 42 gallons per barrel. Traders who skip that step get answers that are off by a factor of forty-two.
Cracks widen when refineries go down for maintenance or a hurricane closes the Gulf Coast, and collapse when refining capacity outruns demand. Refiners hedge by selling the crack; speculators trade it as a cleaner read on fuel demand than crude alone.
Example: crude $78.00, RBOB $2.45/gal ($102.90/bbl), ULSD $2.60/gal ($109.20/bbl). A 3-2-1 crack is (2 x 102.90 + 1 x 109.20 - 3 x 78.00) / 3 = $26.00 per barrel. One 3-2-1 position is worth 3,000 barrels, so a $1 move is $3,000.
Related: rbob-gasoline, heating-oil, cl, light-sweet-crude, spark-spread