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Variable cash margin
Variable cash margin is one common measure of refinery margin or economic performance.
Variable cash margin is typically calculated per barrel of crude oil processed and is equal to the gross margin, less variable costs such as energy, catalyst, and chemicals. Variable cash margin does not account for labor, materials, or other fixed costs.
Variable cash margin is the metric most useful in assessing the value of adjusting utilization of the refinery in the short term, as it takes into account all of the elements of profit that change with different utilization. Consequently, it is the key measure of profitability against which the LP model will optimize.
