XML 31 R20.htm IDEA: XBRL DOCUMENT
v3.24.1.u1

Price Risk Management Activities | 3 Months Ended
--- | ---
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
PRICE RISK MANAGEMENT ACTIVITIES | 12. PRICE RISK MANAGEMENT ACTIVITIES General We are exposed to market risks primarily related to the volatility in the price of commodities, foreign currency exchange rates, and the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. We enter into derivative instruments to manage some of these risks, including derivative instruments related to the various commodities we purchase or produce, and foreign currency exchange and purchase contracts, as described below under “Risk Management Activities by Type of Risk.” These derivative instruments are recorded as either assets or liabilities measured at their fair values (see Note 11), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income and other comprehensive income (loss) is summarized below under “Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss).” Risk Management Activities by Type of Risk Commodity Price Risk We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil, waste and renewable feedstocks, and corn), the products we produce, and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, such as futures and options. Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that is periodically reviewed with our Board and/or relevant Board committee. We primarily use commodity derivative instruments as cash flow hedges and economic hedges. Our objectives for entering into each type of hedge is described below. •Cash flow hedges – The objective of our cash flow hedges is to lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable. •Economic hedges – Our objectives for holding economic hedges are to (i) manage price volatility in certain feedstock and product inventories and (ii) lock in the price of forecasted purchases and/or product sales at existing market prices that we deem favorable. As of March 31, 2024, we had the following outstanding commodity derivative instruments that were used as cash flow hedges and economic hedges, as well as commodity derivative instruments related to the physical purchase of corn at a fixed price. The information presents the notional volume of outstanding contracts by type of instrument and year of maturity (volumes in thousands of barrels, except corn contracts that are presented in thousands of bushels).
|  | Notional Contract Volumes by Year of Maturity |  |  |  |
|  | 2024 |  |  |  |
Derivatives designated as cash flow hedges: |  |  |  |  |  |
Refined petroleum products: |  |  |  |  |  |
Futures – long |  | 3,041 |  |  |  |  |
Futures – short |  | 7,290 |  |  |  |  |
Derivatives designated as economic hedges: |  |  |  |  |  |
Crude oil and refined petroleum products: |  |  |  |  |  |
Futures – long |  | 157,473 |  |  |  |  |
Futures – short |  | 166,013 |  |  |  |  |
Options – long |  | 400 |  |  |  |  |
Options – short |  | 400 |  |  |  |  |
Corn: |  |  |  |  |  |
Futures – long |  | 43,330 |  |  |  |  |
Futures – short |  | 60,110 |  |  |  |  |
Physical contracts – long |  | 15,514 |  |  |  |  |
Foreign Currency Risk We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of our operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of March 31, 2024, we had foreign currency contracts to purchase $615 million of U.S. dollars. Of these commitments, $405 million matured on or before April 19, 2024 and the remaining $210 million will mature by April 29, 2024. Renewable and Low-Carbon Fuel Programs Price Risk We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. To manage this risk, we enter into contracts to purchase these credits. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. The Renewable and Low-Carbon Fuel Programs require us to blend a certain volume of renewable and low-carbon fuels into the petroleum-based transportation fuels we produce in, or import into, the respective jurisdiction to be consumed therein based on annual quotas. To the degree we are unable to blend at the required quotas, we must purchase compliance credits (primarily Renewable Identification Numbers (RINs)). The cost of meeting our credit obligations under the Renewable and Low-Carbon Fuel Programs was $204 million and $413 million for the three months ended March 31, 2024 and 2023, respectively. These amounts are reflected in cost of materials and other. Fair Values of Derivative Instruments The following table provides information about the fair values of our derivative instruments as of March 31, 2024 and December 31, 2023 (in millions) and the line items in our balance sheets in which the fair values are reflected. See Note 11 for additional information related to the fair values of our derivative instruments. As indicated in Note 11, we net fair value amounts recognized for multiple similar derivative contracts executed with the same counterparty under master netting arrangements, including cash collateral assets and obligations. The following table, however, is presented on a gross asset and gross liability basis, which results in the reflection of certain assets in liability accounts and certain liabilities in asset accounts:
| Balance Sheet Location |  | March 31, 2024 |  | December 31, 2023
|  | Asset Derivatives |  | Liability Derivatives |  | Asset Derivatives |  | Liability Derivatives
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Receivables, net |  | $ | 29 |  |  | $ | 36 |  |  | $ | 141 |  |  | $ | 34 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |
Commodity contracts | Receivables, net |  | $ | 907 |  |  | $ | 939 |  |  | $ | 662 |  |  | $ | 609 |
Physical purchase contracts | Inventories |  | 1 |  |  | 2 |  |  | — |  |  | 6 |
Foreign currency contracts | Receivables, net |  | 2 |  |  | — |  |  | — |  |  | — |
Foreign currency contracts | Accrued expenses |  | — |  |  | — |  |  | — |  |  | 7 |
Total |  |  | $ | 910 |  |  | $ | 941 |  |  | $ | 662 |  |  | $ | 622 |
Market Risk Our price risk management activities involve the receipt or payment of fixed price commitments into the future. These transactions give rise to market risk, which is the risk that future changes in market conditions may make an instrument less valuable. We closely monitor and manage our exposure to market risk on a daily basis in accordance with policies that are periodically reviewed with our Board and/or relevant Board committee. Market risks are monitored by our risk control group to ensure compliance with our stated risk management policy. We do not require any collateral or other security to support derivative instruments into which we enter. We also do not have any derivative instruments that require us to maintain a minimum investment-grade credit rating. Effect of Derivative Instruments on Income and Other Comprehensive Income (Loss) The following table provides information about the gain (loss) recognized in income and other comprehensive income (loss) due to fair value adjustments of our cash flow hedges (in millions):
Derivatives in Cash Flow Hedging Relationships |  | Location of Gain (Loss) Recognized in Income on Derivatives |  |  |  | Three Months Ended March 31,
|  |  | 2024 |  | 2023
Commodity contracts: |  |  |  |  |  |  |  |  |  |
Gain (loss) recognized in other comprehensive income (loss) |  | n/a |  |  |  |  |  | $ | (60) |  |  | $ | 95 |
Gain reclassified from accumulated other comprehensive loss into income |  | Revenues |  |  |  |  |  | 24 |  |  | 38 |
For cash flow hedges, no component of any derivative instrument’s gain or loss was excluded from the assessment of hedge effectiveness for the three months ended March 31, 2024 and 2023. For the three months ended March 31, 2024 and 2023, cash flow hedges primarily related to forecasted sales of renewable diesel. As of March 31, 2024, the estimated deferred after-tax loss that is expected to be reclassified into revenues within the next 12 months was not material. The changes in accumulated other comprehensive loss by component, net of tax, for the three months ended March 31, 2024 and 2023 are described in Note 5. The following table provides information about the gain (loss) recognized in income on our derivative instruments with respect to our economic hedges and our foreign currency hedges and the line items in our statements of income in which such gains (losses) are reflected (in millions):
Derivatives Not Designated as Hedging Instruments |  | Location of Gain (Loss) Recognized in Income on Derivatives |  |  |  | Three Months Ended March 31,
|  |  | 2024 |  | 2023
Commodity contracts |  | Revenues |  |  |  |  |  | $ | (4) |  |  | $ | (7) |
Commodity contracts |  | Cost of materials and other |  |  |  |  |  | — |  |  | 83 |
Commodity contracts |  | Operating expenses (excluding depreciation and amortization expense) |  |  |  |  |  | — |  |  | 1 |
Foreign currency contracts |  | Cost of materials and other |  |  |  |  |  | 15 |  |  | (3) |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//815/tableOfContent + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration