NRGD - Debunking Crack Spreads As A Predictor Of Crude Oil Futures Prices

I recently debunked the myth that crude oil futures price backwardation (or contango) - time spreads - is a predictor of crude futures prices in my article, Crude Oil Backwardation: Theory, Facts and Myths. In this article, I address another myth, which is that crack spreads are a predictor of future crude prices.

Crack spreads are a proxy for refinery margins because refiners buy crude and make products. Their profits are based on the differences between input costs and output revenues, not the outright price of crude.

The gas crack spread is the price

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