The following is for everyone EXCEPT Perry E. Metzger (perry@...),
who is instructed NOT to read the following:


Because of the special situation of Hurricane Rita, the New York Mercantile
Exchange (NYMEX) is having a special Sunday trading session:

A little bit earlier this morning, the November price:

<> wholesale gasoline $1.9300, off 6.49 cents/gallon

<> wholesale heating oil $194.90, off 3.37 cents/gallon

<> crude oil $63.15, off $1.04/barrel

Thus, the crack spread (gross operating refinery margin) slipped
$1.16/barrel, but is still at an historically wide $18.23/barrel.


Here's the work sheet for calculating the crack spread:

................................................................product
..............................................................equivalent
...........................per gallon....per barrel ....per barrel
Gasoline...............$1.9300.......$81.06.......$48.64
Heating Oil............$1.9490.......$81.86.......$32.74
Product value............................................$81.38
Less Crude Oil..........................................$63.15
......Crack spread....................................+$18.23

Note 1: There are approximately 42 gallons in a barrel, depending on
temperature.

Note 2: A 42 gallon barrel of crude oil will yield approximately 25.2 gallons
of gasoline (60%) and 16.8 gallons of distillates (40%). Distillates
includes heating oil, jet fuel, etc., etc.

Note 3: The price of heating oil is being used to represent all distillates.


In recent years the crack spread (the gross operating refining margin: the
difference between the price received from selling petroleum products and the
price paid to buy crude petroleum) was averaging only about +$3.50 to
+$4.50/barrel. This was not wide enough to encourage expansion in refining
capacity
because the shortfall of refining capacity in the U.S. was offset by imports of
products, mostly gasoline, from refineries outside the U.S. (Most people,
including the MSM, were aware that the U.S. imports crude oil, but were
oblivious
to the imports of gasoline.)

Then, almost without warning, earlier this year, China and India, benefiting
from sales to Wal-Mart. etc., etc., started to compete for these non-U.S.
gasoline supplies, and, as a result, the crack spread, started to widen into the
+$10.00 to +$12.50/barrel area as the price of petroleum products started to
rise faster than crude oil, signaling to the market that more refining capacity
was needed.

Then came Hurricane Katrina, and now Hurricane Rita, and with refinery
shutdowns, actual and expected, the crack spread has widened further, and has
been
trading from $15.00 to $22.00/barrel.


A widening in the gross operating margin should generate extra profits, if
the politicians can keep their hands off, so that the industry can finance new
construction using internal funds rather than borrowed financing, and attract
new investment capital as well, if those damned politicians can keep their
hands off and do not interfere with things like "windfall profits taxes" and/or
enacting "price gouging legislation".



I hope this information is useful or, at least, interesting.


L'Shannah Tovah* & Happy 5766,

Walter Greenspan
Great Falls, MT

* L'Shannah Tovah (li-SHAH-nuh TOH-vuh; li-shah-NAH toh-VAH)
Hebrew. Lit. for a good year. The common greeting during Rosh ha Shannah and
the Days of Awe. This is a shortening of "L'Shannah tovah tikatev v'taihatem"
(or, to women, "L'Shannah tovah tikatevi v'taihatemi"), which means, "May you
be inscribed and sealed for a good year." This year, Rosh ha Shannah begins
at sunset on Monday, October 3 on the civil calendar.