Crude oil spread: On July 10, a refiner observes a favorable crack spread and wants to hedge its August spread for 60,000 barrels of crude oil. Given a 5:3:2 crack spread, set up the hedge for the refiner on July 10 using the following information:

	Crude oil	Gasoline	Heating oil
Contract specifications	1,000 barrel (1 barrel = 42 gal)	42,000 gal	42,000 gal
July 10	Aug futures 49.00 USD/barrel	Aug futures 1.3040 USD/gal	Aug futures 1.3575 USD/gal

What is the refiners expected crack spread (i.e., margin) if you assume an expected August basis of -0.30 USD/barrel between the cash spread at the refiners location and the New York futures spread?

Date	Cash Market	Futures Market	Basis
July 10	set up hedge, expected crack spread USD/barrel		expected -0.30 USD/barrel
August 1

On August 1, the refiner lifts the hedge and conducts the corresponding transactions in the cash market at the prices given below. What is the refiners final crack spread per barrel

	Crude oil	Gasoline	Heating oil
August 1	August cash 35.20 USD/barrel	August cash 1.0755 USD/gal	August cash 1.1540 USD/gal
August 1	August futures 34.80 USD/barrel	August futures 1.0735 USD/gal	August futures 1.1550 USD/gal