Why Refineries Are Jacking Up Gas Prices

EIA defines a crack spread as “the difference between the purchase price of crude oil and the selling price of finished products, such as gasoline and distillate fuel” — and calls it “an indicator of the short-term profit margin of oil refineries.”

“Crack” refers to cracking — breaking long hydrocarbon chains into lighter, more valuable products. The 3-2-1 ratio approximates a typical US refinery's real output: for every 3 barrels of crude, roughly 2 barrels of gasoline and 1 barrel of distillate.

Gasoline and distillate trade in dollars per gallon; crude in dollars per barrel. There are 42 gallons in a barrel, so the products have to be converted first. Run it on the actual numbers:

Reuters, tracking the Nymex prompt spread directly, reported it at $64.58/bbl on July 8 and a record $69.66/bbl on July 16 — with the diesel crack at a record $91/bbl and gasoline at $59/bbl. The intra-month peak was higher than the July 22 figure above; all three readings tell the same story.

Why this matters to you: the crack spread is the cleanest single read on whether an expensive pump price is a crude problem or a refining problem. Crude up and the crack flat means blame the barrel. Crude flat or down while the crack rises means blame the bottleneck.

Caveats. 3-2-1 is a simplification — real refineries have different configurations. It's a gross margin: it ignores energy, labour, maintenance and hedging, so refiners do not pocket $69/bbl. Regional cracks differ enormously — the West Coast runs its own, much wider spread. And EIA's official version uses Louisiana Light Sweet crude, which isn't on EIA's own free spot-price page — so use Nymex futures, as above.

They didn't produce less — they produced different. A nuance worth being precise about: refiners didn't cut back. They ran harder than normal. Gasoline production actually rose 3.3%. It just rose far more slowly than jet (+26.5%) while demand held up — so gasoline inventories drained anyway.

This has happened before. In November 2018 EIA documented the same dynamic in reverse: New York Harbor gasoline margins collapsed from 26¢/gal to 4¢ to negative, which EIA said “may signal a shift by refiners to maximize diesel fuel production.” And in 2024, jet fuel's share of refinery output hit a record high while gasoline's fell to its lowest since 2015. The barrel gets re-cut whenever relative margins move. This is the mechanism working normally — at unusual intensity.

1. Lost refining capacity — but read this carefully. US operable crude distillation capacity peaked at 18.98 million b/cd (Jan 1, 2020) and sits at 18.16 million b/cd (Jan 1, 2026) — down 815,592 b/cd, or 4.3%, across 130 operable refineries.

The West Coast has been hit hardest in percentage terms: PADD 5 fell from 2,874,571 to 2,419,871 b/cd (−15.8%), and roughly −21% once Valero Benicia (145,000 b/d, idled April 2026) is excluded. EIA notes the Los Angeles and Benicia closures alone equal 17% of California capacity.

Correction to the video. The video attributes tight diesel to refineries closed in the western United States. The Reuters line being referenced actually reads “refinery closures in the West” — meaning the Western world. And in aggregate, non-West-Coast closures were larger: Philadelphia Energy Solutions (335,000 b/cd), LyondellBasell Houston (263,776 b/cd), Phillips 66 Alliance (255,600 b/cd). West Coast closures are real and matter regionally — EIA attributes PADD 5's fragility largely to “the relative lack of logistical connectivity on the West Coast” — but they are not the main driver of national diesel tightness.

2. Hormuz. Effectively closed roughly 110 days (Feb 28 – Jun 18). Middle East producers cut output by over 11 million b/d at the trough. Crude round-tripped on reopening. Products didn't.

3. Russia's export bans — the biggest single driver right now. After sustained Ukrainian drone strikes, Russia banned diesel exports on July 8, 2026, extending an existing partial ban to producers as well as traders. It sits on top of a gasoline export ban since April 1 and Russia's first-ever jet fuel export ban (June 1 – Nov 30).

The damage behind it is severe: at least 25 Russian refineries hit since August 2025; refinery runs at ~3.80 million b/d, the lowest in over 21 years; roughly 1.5–2.0 million b/d of processing capacity effectively offline. Russian diesel loadings collapsed from ~817,000 b/d (2025 average) to 234,000 b/d over July 1–10. Russia is one of the world's largest diesel exporters — remove that, and US refiners become the marginal global supplier, at the marginal price.

4. China — but not the way the video framed it. China did restrict clean-product exports from early March, but it was administrative, not a quota cut, and never total: bonded jet for international flights, marine bunkering, and Hong Kong/Macau were all exempt, and state refiners kept shipping. Quotas actually rose — the second 2026 batch took the annual total to 32 million tonnes, slightly above 2025. China reopened on July 8 with July shipments planned near 3 million tonnes, but the mix is mostly jet fuel (~1.9 Mt jet vs 600–700 kt diesel and just over 400 kt gasoline).

Retail regular went $2.937 → $4.001 per gallon — +$1.064/gal.

So the $15–20 figure is best read as the refining-attributable portion, not the total. A viewer comparing their whole fuel bill to February will find it up nearer $43 a month. Both numbers are defensible — they answer different questions. It's flagged here because someone who checks their own spending and finds a bigger number deserves to know why.

The Weekly Petroleum Status Report lands Wednesdays after 10:30 a.m. ET and covers the week ending the prior Friday. (Holiday weeks slip a day.) It is the single highest-value free dataset in energy, and it moves markets on release.

Always compare inventories to the 5-year average for the same week, never to last week alone — these series are strongly seasonal. Gasoline builds in winter and draws in summer; distillate doubles as a heating fuel and gets drawn down October through March.

Gasoline stocks below the 5-year average means upward pressure on pump prices regardless of what crude does. Distillate stocks below average means the diesel premium persists, cracks stay wide, and refiners keep favouring diesel — that is the upstream cause of expensive gasoline. And jet building while gasoline draws is an active mix shift in progress. That last one is the clearest tell in the current data, and it's exactly what's happening.

Demand tells you whether tightness is resolving or being absorbed. Demand falling while prices rise is demand destruction — the market rationing itself, usually the beginning of the end of a spike. Demand holding while inventories drain means the squeeze has further to run. Distillate is doing the first. Gasoline is doing the second.

EIA's own guidance: use the four-week moving average, not single weeks — these are survey estimates and get revised. And “product supplied” measures disappearance from the primary supply chain, a proxy for consumption rather than a direct measurement of it.