Here's why gas is more expensive than ever even though oil prices are down

• Crude oil prices are on the downtrend, yet gasoline in the US is the most expensive it's ever been.
• The split has to do with the "crack spread," or how much refiners charge to process oil into gas.

Oil prices are falling but refueling your car has never been pricier. Blame the "crack spread," the latest supply-chain hurdle to exacerbate US inflation.

For a few weeks, it looked as though Americans were getting some relief. Crude oil prices eased as countries released millions of barrels from their strategic reserves. Gasoline prices fell in kind, with the average nationwide price per gallon falling to $4.06 in mid-April after hitting a record $4.32 the month prior.

The cooldown was short-lived. Gas prices quickly rebounded through late April and early May. The nationwide average price for a gallon of gas touched an all-time high of $4.40 on Wednesday.

The cause, however, hasn't been a similar rally in crude prices, which are down about 15% since the early-March peak. Instead, oil refiners are now the bottleneck in the energy market, and they're reaping record profits in the meantime.

While the prices of crude oil and gas typically move in tandem, they're not directly linked. Crude must be processed by oil refineries before it becomes the gas, diesel, and jet-fuel used for travel. The refining process comes at a cost, and that cost is known as the crack spread. "Crack" describes the process of breaking crude oil down into key components, and "spread" harks to the price difference between crude oil bought by refiners and the final products sold by them.

The crack spread has long been an extra burden shouldered by consumers, but the size of that burden has surged in recent weeks. The margin hit a record of nearly $55 per barrel of gasoline last week, Bloomberg reported Monday. By comparison, the crack spread averaged about $10.50 per barrel from 1985 to 2021, and only rarely rose above $20 when refiners were swamped with demand. The new high effectively means gasoline costs about $155 per barrel, well above the $100-per-barrel that West Texas Intermediate crude currently trades for.

Current crack spreads are even higher for diesel and other crude products. That can affect consumers through other costs like plane tickets and shipping rates.

The reasoning behind such large spreads is, ironically, largely to do with the rebound in crude supply. The global release of crude oil from countries' strategic reserves have helped ease the supply-demand imbalance that plagued energy markets in early 2022. Yet only a small fraction of the release was of refined products, and that only took place in Europe. The rest of the world is desperate for gasoline and other petroleum products, not the crude released by the US and its allies.

The release has also created a new supply-chain bottleneck. Refiners are working at full tilt to process crude into final products, but overall refining capacity has been on the decline since the start of the pandemic. The onset of virus-related lockdowns forced many plants to shut their doors, and that's left the industry unable to service the boom in demand for crude processing. Total US refinery capacity is currently the second-lowest its been since late 2014, according to the Energy Information Administration.

The European Union faces an even tougher dilemma as crude supplies there remain tighter than in the US. The bloc was heavily reliant upon Russian crude before the country's invasion of Ukraine, and members have since moved to block the use of Kremlin-sourced energy commodities. That leaves the EU with both diminished gas supply and the need to find crude oil elsewhere.

Cooling demand could solve the imbalance, but that's unlikely to happen. The coming summer months tend to see increased travel activity, meaning demand for gas, diesel, and jet fuel will all likely climb. COVID-19 cases also remain relatively low in the US, meaning there likely won't be another round of lockdowns and related drop in travel activity.

Bolstered refining capacity, then, is the sustainable path to lowering prices at the pump. But reopening facilities will take some time, meaning Americans could be in for many more headlines of new gas-price records.