Gross Margin

Gross margin is one common measure of refinery margin or economic performance.

Gross margin is typically calculated per barrel of crude oil processed and is the difference between the value of the refined products produced and the cost of the crude oil and other feedstocks used to produce them.

Typically, gross margin does not account for other costs such as energy, chemicals/catalysts, labor, materials, or fixed costs. However, sometimes the fuel generated by the refinery will be included in the product value in gross margin, and then also included in the energy cost when calculating variable cash margin. This has the effect of inflating the gross margin measure.

Gross margin is the metric most useful in assessing the direct effect of market conditions on refinery economics, separate from the effects of operational performance.

McKinsey uses cookies to improve site functionality, provide you with a better browsing experience, and to enable our partners to advertise to you. Detailed information on the use of cookies on this Site, and how you can decline them, is provided in our cookie policy. By using this Site or clicking on "OK", you consent to the use of cookies.