Refiners cash in on wide crack spreads as US pump prices hit a Labor Day record and Bessent floats $40 crude

Refiners are making good money on wide crack spreads. Two other stories this week bear on where crude goes next, and they point opposite ways.

Crack spreads

Canadian refineries are running fat margins, enough that the Financial Post is calling it "Crackageddon" in a video segment out this week. The number that matters for a jobber is the spread between what a refiner pays for crude and what it gets for gasoline and diesel. When that gap is wide, refiners run hard and product keeps flowing. It also means the pump price is being set by the refined-product market more than by the barrel underneath it, so a soft crude tape does not automatically hand you cheaper gallons. Wide cracks are good news for supply and bad news for anyone waiting on retail to follow crude down.

The $40 call

Treasury Secretary Scott Bessent says crude could fall as low as $40 a barrel once the Iran war ends, and his reasoning is supply. He sees a heavily oversupplied market as new production comes online. Take it for what it is, which is a forecast from a Treasury official, not a done deal. If he is right and crude eases toward $40 while cracks stay wide, refiners keep the margin and the downstream buyer may not see much relief at the rack. If cracks compress at the same time, that is when pump prices actually move.

Record pump prices

US gasoline prices were set to hit a record over the Labor Day weekend, per reporting this week, which your customers already feel at the pump. It sits oddly next to a Treasury Secretary talking crude down to $40. Both can be true at once, and the reason is the crack spread doing the work between the barrel and the pump. High product prices with a possibly softening crude tape is the exact setup where refiners win and retail lags.

What to watch

Watch the crack spread more than the crude price. The spread decides whether any drop in the barrel reaches your customers or stays with the refiner. Watch whether crude softens the way Bessent expects and whether the new supply he points to shows up. And watch post-holiday demand, which tends to ease as summer driving winds down, though that only helps at the pump if refining margins come off their highs too.