Question: 1. It is currently April and a Refiner would like to hedge her July exposure to the crude oil and products markets. August crude oil

1. It is currently April and a Refiner would like to hedge her July exposure to the crude oil and products markets. August crude oil futures are trading around $80 per barrel. September gasoline futures are trading at $3 per gallon. Given that 42 gallons = 1 barrel, at what price is the forward crack spread trading?

2. It is now June and the same Refiner from the above question buys crude oil in the cash market for $75 per barrel and sells gasoline from existing inventories at $3.20 per gallon. Where is the spot crack spread trading?

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Answer 1 The forward crack spread can be calculated as follows Forward Crack Spread Price of Refined ... View full answer

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