ABSTRACT
In this paper, we focus on the rening margin. Contrary to oil prospecting and production, rening is a margin business; a rening company buys oil and sells rened products (e.g., gasoline and heating oil) and makes a prot that is, in principle, independent of oil and product prices. In other words, the prot of a rening company (i.e. the rening margin) is related to the dierence between the prices of crude oil and the rened products. However, this dierence does not necessarily decrease (or increase) when the prices of crude oil and its products rise (or fall). As a result, reneries face a signicant risk when, for example, oil prices rise but product prices remain static or decline. It is clear that rening companies must somehow protect their rening margin using derivative contracts.
