What drives petroleum product prices: Prices and crack spreads
Gasoline is the most widely used petroleum product in the United States. Gasoline is priced at various locations around the world and regional prices tend to move together in the long run because gasoline can be transported between markets, thereby linking their supply and prices. Differences in absolute price levels as well as short-term price changes across the world reflect varying gasoline specifications, refinery maintenance schedules, unplanned refinery outages, transportation constraints, peak consumption seasons, as well as regional inventory levels.
For example, gasoline spot prices in Los Angeles—a regional benchmark price hub for California—tend to be higher than in other regions because California mandates a special blend of gasoline designed to reduce pollution and improve air quality. This fuel burns cleaner but is more expensive to produce because it requires more processing steps and expensive blending components. Refiners outside the state only make this blend to supply California’s market and there are limited infrastructure connections with other regions of the country, meaning that California primarily relies on a limited number of in-state refineries for its gasoline supply. In addition, the state’s Cap-and-Invest Program and Low Carbon Fuel Standard add costs associated with fuel supplier emissions and carbon intensity.
Data source: Bloomberg, L.P., U.S. Energy Information Administration
Note: Real prices are adjusted to July 2025 dollars. Prices are for conventional blendstock for oxygenate blending (CBOB), with the exception of the LA price, which reflects California reformulated gasoline blendstock for oxygenate blending (CARBOB).
Distillate—which includes petroleum products like diesel and heating oil—is also traded globally and priced in various regions around the world. Like the disparity in gasoline prices, the disparity in distillate prices primarily reflects differences in quality, primary uses, seasonal consumption, and local market factors. Distillate prices tend to move together because of significant trade across the globe. In 2024, the United States exported about one-quarter of the distillate fuel oil it produced.
Data source: Bloomberg, L.P., U.S. Energy Information Administration
Note: Real prices are adjusted to July 2025 dollars. Prices are for conventional blendstock for oxygenate blending (CBOB), with the exception of the LA price, which reflects California reformulated gasoline blendstock for oxygenate blending (CARBOB).
In addition to trading physical quantities of petroleum products, market participants can also use futures contracts to buy or sell gasoline and distillate for future delivery, or to hedge or speculate on future price movements. Since 2006, the underlying commodity for the gasoline futures contract has been reformulated blendstock for oxygenate blending (RBOB), the petroleum component of gasoline in many areas of the country prior to the addition of ethanol to produce finished gasoline.
Since the spring of 2013, the underlying commodity for the distillate (or heating oil) futures contract has been ultra-low sulfur diesel (ULSD), a distillate with sulfur content of less than 15 parts per million (ppm). Prior to this change, the underlying commodity for the distillate futures contract was allowed to have sulfur content up to 2,000 ppm, reflecting the type of distillate commonly used for home heating purposes.
Crack spreads, which represent the price difference between products and crude oil, can be used to determine the relative value of various petroleum products for refineries to produce. Crack spreads vary by product and can rise or fall depending on the time of year and on market conditions.
Data source: Bloomberg, L.P., U.S. Energy Information Administration
Note: Real prices are adjusted to July 2025 dollars. The crack spreads are calculated by subtracting the value of a gallon of crude oil from the value of a gallon of RBOB or ULSD.
Seasonality
Petroleum product crack spreads often exhibit seasonality. During the summer months, the underlying commodity of the RBOB front month contract is required to have a lower Reid Vapor Pressure (RVP) specification, a more expensive type of gasoline to refine. Starting March 1, RBOB futures prices tend to increase several cents from February averages to reflect the higher valued commodity. This, in turn, is reflected in a higher crack spread. The crack spread continues to remain fairly high through the late spring and into the summer months as the U.S. driving season picks up, resulting in higher domestic demand for the product. On September 1, the underlying commodity of the RBOB front month contract reverts back to a higher RVP specification, representing a lower-cost gasoline. The gasoline crack spread declines to reflect the lower price of gasoline.
As domestic gasoline consumption declines during the fall and winter months, U.S. distillate consumption typically rises. In the fall, distillate consumption increases as diesel-powered agricultural equipment is used to harvest and transport crops, particularly in the Midwest. In the winter, consumers, particularly in the U.S. northeast, use distillate for heating purposes. With the increased demand, distillate crack spreads are usually highest from October to February.
Data source: Bloomberg, L.P., U.S. Energy Information Administration, Petroleum Supply Monthly
Note: Real prices are adjusted to July 2025 dollars. The crack spreads are calculated by subtracting the value of a gallon of crude oil from the value of a gallon of RBOB or ULSD.