Start with the production scheme
Three familiar families describe different processes. Crack links crude oil and refined products; crush links soybeans, oil and meal; spark links electricity and fuel while accounting for conversion efficiency. EIA explains crack as the price difference between products and crude, USDA ERS defines soybean gross processing margin through oil and meal revenue less soybean cost, and EIA separately explains spark. They cannot be reduced to one price difference without physical coefficients.[1][2][3]
Crack: a basket of outputs
Set a simplified author-built model, not an exchange-combination specification. Three units of crude cost 70 monetary units each. They produce, notionally, two units of product A at 90 each and one unit of product B at 80. Feedstock cost is 210, basket revenue is 260 and the difference is 50 for the processed batch, or about 16.67 per unit of crude.
A real refinery need not have this yield. Feedstock mix, equipment configuration and product demand change proportions and quality. In the educational calculation, all prices are deliberately expressed in comparable units. If a product trades in another physical measure, convert first rather than subtracting screen numbers directly. Other operating and financial expenses still remain.
Crush: two products and yield coefficients
Suppose one tonne of notional beans costs 400. In the author-built model it produces 0.18 tonnes of oil at 1,000 per tonne and 0.78 tonnes of meal at 350. Revenue is 180 plus 273, or 453 in total. The conditional difference from feedstock is 53. Remaining mass and process losses are not valued here; that is an explicit limitation.
The example coefficients are not norms for a particular crop or contract. Real analysis needs verified yields, quality characteristics and market units for each product. An exchange combination uses discrete contract sizes and may only approximate physical proportions. Show the plant economics separately from the actual hedge structure when a financial instrument is being studied.
Spark: fuel required per unit of electricity
This requires a heat-rate coefficient: the quantity of fuel in a specified energy unit per unit of electricity generated. In the fictional example, electricity sells at 70 per megawatt-hour, fuel costs 4 per thermal unit and consumption is 7 such units per megawatt-hour. Fuel cost is 28 and spark is 42 per megawatt-hour.
This is not yet a plant’s net margin. If specified variable non-fuel costs are 10, the remainder is 32 before fixed costs and other items. If heat rate worsens to 9 instead of 7, fuel cost increases to 36 and the original spark falls to 34. The same electricity price does not imply the same economics for different plants.
Market reference and own result
A plant may face different feedstock quality, purchase location, delivery schedule and selling price. A contract spread need not exactly offset these differences. Purchases and sales also occur at different times, while production requires working capital. A positive calculated difference today does not guarantee positive cash flow every month. Compare it with [working capital](/guides/working-capital/).
Physical utilisation is another risk. A shutdown changes output, but contractual financial obligations do not necessarily disappear with it. Add scenarios for maintenance, feedstock shortage, supply restrictions and yield changes. These are production-economics conditions, not instructions to trade. Even a well-explained price relationship does not make a spread risk-free.
A reader’s verification checklist
Draw inputs and outputs, label units, set verified coefficients and list excluded costs separately. Reconcile price scales and dates. After the calculation, name the result precisely: a conditional gross difference, not net profit. If a financial position is analysed, also check leg sizes and infrastructure using the [intermarket-spreads guide](/guides/intermarket-spreads/). This sequence helps explain the business without turning an industry term into a trading recipe.
Dimensional check
Every term must ultimately have the same monetary unit per the same production base. If one product is measured per tonne, another per batch and feedstock per contract, the difference has no economic meaning yet. Convert to a common base first, then subtract. This simple check is mandatory before discussing the attractiveness of a conditional margin.
Sources and verification limits
[1] EIA, “An introduction to crack spreads.” Difference between crude and a refined-product basket; not net margin.
[2] USDA ERS, “Soybean Processing as a Real Option.” Oil and meal yields from soybeans; the example coefficients are author-built.
[3] EIA, “An introduction to spark spreads.” Spark as electricity value less fuel cost using heat rate.
The initial CME materials could not be obtained in full. The complete primary replacements listed above support only the named definitions and educational arithmetic; trading interpretations and predictive promises were not validated.
Crack: product shortage and feedstock cost can move independently
EIA defines crack through product and crude value and connects the product side with local and seasonal conditions; the indicator excludes other processing costs.[15](#source-rm-crack) A neighbouring refinery shutdown may raise gasoline relative to crude, but a plant that is itself shut down earns no revenue from output that does not exist. A higher quoted margin and higher operating profit are different events. Check utilisation, available crude quality, product yield, energy costs and the ability to transport products.
For an author-built basket of three equal-volume crude units, suppose two units of gasoline and one unit of distillate result. At crude 70, gasoline 90 and distillate 100, gross difference is 2 × 90 + 100 − 3 × 70 = 70 per basket, or approximately 23.3333 per crude unit. If gasoline falls to 80, distillate rises to 110 and crude remains 70, the result is 60 per basket, or 20 per crude unit. The rise in one product did not offset the fall in the other with double weight. The separate gasoline crack fell from 20 to 10, while the distillate crack rose from 30 to 40.
This is a specified basket, not a physical balance for a particular refinery: a real plant produces other products and incurs losses, fuel and maintenance costs. Travel season, heating and freight demand affect gasoline and distillates differently, which explains the need for weights.[1](#source-mk-eia-product-balance) With prices unchanged, lower available output reduces total earned margin even if the per-unit indicator is unchanged.
Crush: two output markets and competition for beans
USDA treats soybean processing as joint production of oil and meal and separately describes uses of both products and competition between bean exports and domestic processing.[3](#source-mk-usda-soy-sector)[16](#source-rm-crush) Strong oil demand therefore does not imply equal meal demand. If processing expands to satisfy one market, extra supply of the other product may pressure its price. Yield, feedstock availability, transport and energy change the economics of processing independently of these two markets.
Continue the conditional yields of 0.18 tonnes of oil and 0.78 tonnes of meal per tonne of beans. At prices 1,000, 350 and bean cost 400, the difference is 53. In a new scenario, oil rises to 1,100, meal falls to 320 and beans rise to 410. The difference is 0.18 × 1,100 + 0.78 × 320 − 410 = 37.60. The change decomposes into +18 from oil, −23.40 from meal and −10 from feedstock, for −15.40 overall. This is sensitivity analysis with fixed author-built yields, not a current technology norm or a ready-made futures position.
When bean quality deteriorates, yield and processing cost change; maintenance changes available volume. A market gross difference does not automatically include these changes, inventory financing interest or local basis. Verify yield coefficients, purchase dates and sale dates separately from the crush chart.
Spark: system load is not plant efficiency
According to EIA, spark is electricity price per megawatt-hour less gas price multiplied by heat rate, the thermal input per megawatt-hour. EIA also notes regional differences, the influence of inexpensive hydro generation and the omission of many costs from the formula.[17](#source-rm-spark) Weather may raise both electric load and gas price; maintenance, grid constraints and other generators’ output can move electricity prices asynchronously with fuel. One heat-related news item is therefore insufficient to determine the sign of spark.
Let electricity cost 80 per MWh, gas 5 per thermal unit and plant consumption 7 units per MWh. Spark is 45. At electricity 90 and gas 7, it falls to 41: +10 on the electricity side and −14 on the fuel side. If heat rate at the new prices is 9, the result is 27. A higher energy price is compatible with a smaller fuel spread and an even smaller spread for an inefficient plant.
Fixed capacity also does not mean the same energy is sold every hour. Start-up, minimum load, gas availability and outages can limit output. If emissions costs apply, include them as a separate term with an explicit coefficient; ordinary spark does not remove them. These examples do not estimate plant net profit or recommend a position in energy contracts.