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Derivative Financial Instruments, Investments and Fair Value Measurements | 6 Months Ended
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Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments, Investments and Fair Value Measurements | (10) Derivative Financial Instruments, Investments and Fair Value Measurements Derivative Financial Instruments Our segments are subject to fluctuations of commodity prices caused by supply and economic conditions, weather, interest rates, and other factors. To manage the impact of price fluctuations of crude oil and other commodities in our results of operations and certain inventories, and to fix margins on future sales and purchases, the Petroleum Segment uses various commodity derivative instruments, such as futures and swaps. The Company has not designated any of its derivative contracts as hedge accounting and records changes in fair value and cash settlements on the condensed consolidated statements of operations. On a regular basis, the Company enters into commodity contracts with counterparties for the purchases or sale of crude oil, blendstocks, various finished products, and RINs. These contracts usually qualify for the normal purchase normal sale exception and follow the accrual method of accounting. The Petroleum Segment may enter into forward purchase or sale contracts associated with RINs. As of June 30, 2022, the Petroleum Segment had open fixed-price commitments to purchase a net amount of 19 million RINs. All other derivative instruments are recorded at fair value using mark-to-market accounting on a periodic basis utilizing third-party pricing. The following outlines the net notional buy (sell) position of our commodity derivative instruments held as of June 30, 2022 and December 31, 2021:
(in thousands of barrels) | Commodity |  | June 30, 2022 |  | December 31, 2021
Forwards | Crude |  | 519 |  |  | 67 |
Swaps | Group 3 Diesel Cracks |  | (1,100) |  |  | — |
Futures | Crude |  | — |  |  | (20) |
Futures | ULSD |  | (528) |  |  | (220) |
Futures | Soybean |  | 109 |  |  | — |
The following outlines the realized and unrealized (losses) gains incurred from derivative activities, all of which are recorded in Cost of materials and other on the condensed consolidated statements of operations:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Forwards | $ | (4) |  |  | $ | 4 |  |  | $ | 6 |  |  | $ | 22 |
Swaps | (49) |  |  | (5) |  |  | (48) |  |  | (55) |
Futures | (15) |  |  | (1) |  |  | (24) |  |  | (1) |
Total loss on derivatives, net | $ | (68) |  |  | $ | (2) |  |  | $ | (66) |  |  | $ | (34) |
Offsetting Assets and Liabilities The following outlines the condensed consolidated balance sheets line items that include our derivative financial instruments and the effect of the collateral netting. Such amounts are presented on a gross basis, before the effects of collateral netting. The Company elected to offset the derivative assets and liabilities with the same counterparty on a net basis when the legal right of offset exists.
| June 30, 2022 |  | December 31, 2021
| Derivatives |  | Collateral Netting |  | Net Value |  | Derivatives |  | Collateral Netting |  | Net Value
(in millions) | Assets |  | Liabilities |  |  |  | Assets |  | Liabilities |  |
Prepaid expenses and other current assets | $ | 8 |  |  | $ | (3) |  |  | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Other current liabilities | — |  |  | (20) |  |  | — |  |  | (20) |  |  | 5 |  |  | (7) |  |  | — |  |  | (2) |
At June 30, 2022 and December 31, 2021, the Company had $4 million and $4 million of collateral under master netting arrangements not offset against the derivatives within Prepaid expenses and other current assets on the condensed consolidated balance sheets, respectively, primarily related to initial margin requirements. Certain of our derivative instruments contain credit risk-related contingent provisions associated with our credit ratings. If our credit rating were to be downgraded, it would allow the counterparty to require us to post collateral or to request immediate, full settlement of derivative instruments in liability positions. The aggregate fair value of our derivative liabilities with credit risk-related contingent provisions as of June 30, 2022 was $17 million, for which no collateral has been posted. Investments Investments consist of equity securities, which are reported at fair value in Prepaid expenses and other current assets on our condensed consolidated balance sheets. These investments are considered trading securities. Investment income on marketable securities consists of the following:
| Three Months Ended June 30, |  | Six Months Ended June 30,
(in millions) | 2022 |  | 2021 |  | 2022 |  | 2021
Gain on marketable securities | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | 83 |
Investment income on marketable securities | $ | — |  |  | $ | 21 |  |  | $ | — |  |  | $ | 83 |
On January 18, 2022, the Company divested its remaining nominal investment in Delek US Holdings, Inc. (“Delek”). As of June 30, 2022, the Company did not hold any investment in Delek. Fair Value Measurements In accordance with FASB ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business. ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: •Level 1 — Quoted prices in active markets for identical assets or liabilities •Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) •Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value) The following tables set forth the assets and liabilities measured or disclosed at fair value on a recurring basis, by input level, as of June 30, 2022 and December 31, 2021:
| June 30, 2022
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  |  |  | Total
Location and description |  |  |  |  |  |  |  |  |
Other current assets (derivative financial instruments) | $ | — |  |  | $ | 5 |  |  | $ | — |  |  |  | $ | 5 |
Total assets | $ | — |  |  | $ | 5 |  |  | $ | — |  |  |  | $ | 5 |
Other current liabilities (derivative financial instruments) | $ | — |  |  | $ | (20) |  |  | $ | — |  |  |  | $ | (20) |
Other current liabilities (RFS obligations) | — |  |  | (708) |  |  | — |  |  |  | (708) |
Long-term debt and finance lease obligations, net of current portion (long-term debt) | — |  |  | (1,392) |  |  | — |  |  |  | (1,392) |
Total liabilities | $ | — |  |  | $ | (2,120) |  |  | $ | — |  |  |  | $ | (2,120) |
| December 31, 2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  |  |  | Total
Location and description |  |  |  |  |  |  |  |  |
Other current assets (derivative financial instruments) | $ | — |  |  | $ | 1 |  |  | $ | — |  |  |  |  | $ | 1 |
Total assets | $ | — |  |  | $ | 1 |  |  | $ | — |  |  |  |  | $ | 1 |
Other current liabilities (derivative financial instruments) | $ | — |  |  | $ | (2) |  |  | $ | — |  |  |  |  | $ | (2) |
Other current liabilities (RFS obligations) | — |  |  | (494) |  |  | — |  |  |  |  | (494) |
Long-term debt and finance lease obligations, net of current portion (long-term debt) | — |  |  | (1,620) |  |  | — |  |  |  |  | (1,620) |
Total liabilities | $ | — |  |  | $ | (2,116) |  |  | $ | — |  |  |  |  | $ | (2,116) |
As of June 30, 2022 and December 31, 2021, the only financial assets and liabilities that are measured at fair value on a recurring basis are the Company’s investments, derivative instruments, and the RFS obligations. The estimated fair value of cash equivalents, including amounts invested in short-term money market funds, and restricted cash approximate their carrying amounts. The Petroleum Segment’s commodity derivative contracts and RFS obligations, which use fair value measurements and are valued using broker quoted market prices of similar instruments, are considered Level 2 inputs. The Company had no transfers of assets or liabilities between any of the above levels during the six months ended June 30, 2022.

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI https://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
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