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.

The Refinery Reference Desk includes content derived from our industry experts as well as from public data sources such as company websites. Nothing herein is intended to serve as investment advice. This material is based on information that we believe to be reliable and adequately comprehensive, but we do not represent that such information is in all respects accurate or complete. McKinsey Energy Insights does not accept any liability for any losses resulting from use of the content.

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