NEW YORK ( TheStreet) -- Are crack spreads cracking?

On Monday and Tuesday all the action in the oil refiner stock sector was about the flooding down south, but by Wednesday, more fundamental fears about the historically high crack spreads that have buffered the refiner outlook bubbled to the surface.

"The scale of the floods is no joke, but aside from a few specific flood cases, the volatility in refiner stocks is commodity-driven now, and there is violence in the swings," said Dahlman Rose analyst Sam Margolin.

The biggest loss among big refiner losses during the recent energy rout went to Alon USA Energy ( ALJ), down more than 13%, and it is tied to Alon refining operation proximity to floodwaters. On Wednesday afternoon, Louisiana Governor Bobby Jindal said that Alon's Krotz Springs refinery will be shut if the Morganza spillway is opened to relieve flood pressure. At a press conference Jindal said opening the spillway is a "necessary step," which Louisiana official expect may happen by Saturday. Alon shares were down another 3% on Thursday, taking this week's loss to 18%.

On the other hand, the flooding issue could provide a short-term opportunity to European-based refiners or refiners in the U.S. Northeast far from flood waters. Still, analysts were more concerned about what happens after the flood waters recede, and whether the crack spreads could, in effect, crack as demand weakens and refined petroleum product demand slumps, leaving the entire refiner stock sector vulnerable after its massive 2011 rally.

The crack spread is the difference in what a refiner has to pay for crude oil and the profit it can make from refining the crude into petroleum products including gasoline. This year, some refiners have also been supported by the historically wide spread between Brent crude and WTI crude, with the lower priced WTI light, sweet crude serving as another reason for mid-continent-based U.S. refiners to rally.

The crack spread, which had started Wednesday at a historically high level of $32, plummeted through the afternoon and ended trading at $29.86. On Thursday, the crack spread was down another 7% and below $28.

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