Cracking

AAA

DEFINITION of 'Cracking'

Used in the oil and gas industry to refer to a variety of methods whereby a larger product is broken down into smaller by-products. For example, crude oil can be processed (cracked) to produce "lighter" byproducts such as liquefied petroleum gas (LPG) or gasoline. When looking at investments in the oil industry, many investors will look at the crack spread, or the profit from "cracking" crude oil.

INVESTOPEDIA EXPLAINS 'Cracking'

Cracking splits larger molecules into smaller ones, or breaks the bonds of a larger, more complex material into smaller matter. Cracking can be accomplished in a variety of methods, including hydrocracking, fluid catalytic cracking and steam cracking.

RELATED TERMS
  1. Spud

    In the oil and gas industry, the process of beginning to drill ...
  2. Oil Field

    A tract of land used for extracting petroleum, or crude oil, ...
  3. Oil Refinery

    An industrial plant that refines crude oil into petroleum products ...
  4. Crude Oil

    A naturally occurring, unrefined petroleum product composed of ...
  5. Oil Reserves

    An estimate of the amount of crude oil located in a particular ...
  6. Oil Sands

    Sand and rock material which contains crude bitumen (a heavy, ...
Related Articles
  1. Active Trading

    Oil And Gas Industry Primer

    Before jumping into this hot sector, learn how these companies make their money.
  2. Active Trading

    What Determines Oil Prices?

    Changes in the price of oil aren't arbitrary. Read on to find out what moves them and why.
  3. Options & Futures

    Peak Oil: Problems And Possibilities

    Learn a little more about the "non" part of this nonrenewable resource.
  4. Budgeting

    Understanding Oil Industry Terminology

    The drillers are just one aspect of the oil & gas industry, and by knowing some details of their role, you'll be better suited to make investment decisions.
  5. Active Trading

    Unearth Profits In Oil Exploration And Production

    Drill down into financial statements to tap into the right companies and let returns flow.
  6. Active Trading Fundamentals

    Where And How To Trade Energy Stocks

    Energy futures set a high bar to entry for individual traders and investors, redirecting exposure into sector equities and exchange-traded funds.
  7. Professionals

    Is it Safe to Invest in MLPs Again?

    The best bet right now for investors seeking to play a rebound in the price of oil may very well be ETFs that invest in energy MLPs.
  8. Options & Futures

    Forecast Of Oil Production by Country in 2015

    Supply is still ahead of demand and looks to stay ahead for most of 2015. Until production noticeably weakens, that situation is unlikely to change.
  9. Mutual Funds & ETFs

    Want to Go Long Natural Gas? Eye the UGAZ ETN

    Is UGAZ the best way to play natural gas? Maybe not.
  10. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center