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 various government and regulatory 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 20), 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).”

We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil and corn), the products we produce (primarily refined petroleum products), 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 has been approved by our board of directors.

•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 December 31, 2020, 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
	2021	2022
Derivatives designated as cash flow hedges
Refined petroleum products:
Futures – long	334	—
Futures – short	1,364	—

Derivatives designated as economic hedges
Crude oil and refined petroleum products:


Futures – long	53,205	1
Futures – short	50,518	—





Corn:
Futures – long	49,840	10
Futures – short	78,135	155
Physical contracts – long	27,144	145

We are exposed to exchange rate fluctuations on transactions related to our international operations that are denominated in currencies other than the local (functional) currencies of those operations. To manage our exposure to these exchange rate fluctuations, we use foreign currency contracts. These contracts are not designated as hedging instruments for accounting purposes and therefore are classified as economic hedges. As of December 31, 2020, we had foreign currency contracts to purchase $325 million of U.S. dollars and $1.6 billion of U.S. dollar equivalent Canadian dollars. Of these commitments, $1.1 billion matured on or before February 16, 2021 and the remaining $800 million will mature by April 15, 2021.

We are exposed to market risk related to the volatility in the price of credits needed to comply with various governmental and regulatory environmental compliance programs. To manage this risk, we enter into contracts to purchase these credits when prices are deemed favorable. Some of these contracts are derivative instruments; however, we elect the normal purchase exception and do not record these contracts at their fair values. Certain of these programs require us to blend biofuels into the products we produce, and we are subject to such programs in most of the countries in which we operate. These countries set annual quotas for the percentage of biofuels that must be blended into the motor fuels consumed in these countries. As a producer of motor fuels from petroleum, we are obligated to blend biofuels into the motor fuels we produce at a rate that is at least equal to the applicable quota. To the degree we are unable to blend at the applicable rate, we must purchase biofuel credits (primarily RINs in

the U.S.). We are exposed to the volatility in the market price of these credits, and we manage that risk by purchasing biofuel credits when prices are deemed favorable. For the years ended December 31, 2020, 2019, and 2018, the cost of meeting our obligations under these compliance programs was $648 million, $318 million, and $536 million, respectively. These amounts are reflected in cost of materials and other.

We are subject to additional requirements under GHG emission programs, including the cap-and-trade systems, as discussed in Note 20. Under these cap-and-trade systems, we purchase various GHG emission credits available on the open market. Therefore, we are exposed to the volatility in the market price of these credits. The cost to implement certain provisions of the cap-and-trade systems are significant; however, we recovered substantially all of these costs from our customers for the years ended December 31, 2020, 2019, and 2018 and expect to continue to recover the majority of these costs in the future. For the years ended December 31, 2020, 2019, and 2018, the net cost of meeting our obligations under these compliance programs was immaterial.

The following tables provide information about the fair values of our derivative instruments as of December 31, 2020 and 2019 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 20 for additional information related to the fair values of our derivative instruments.

As indicated in Note 20, 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 tables, however, are 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	December 31, 2020				December 31, 2019
		Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments
Commodity contracts	Receivables, net	$	4	$	17	$	9	$	20



Derivatives not designated as hedging instruments
Commodity contracts	Receivables, net	$	399	$	388	$	608	$	648


Physical purchase contracts	Inventories	13		—		—		3
Foreign currency contracts	Receivables, net	—		—		27		—
Foreign currency contracts	Accrued expenses	—		4		—		10
Total		$	412	$	392	$	635	$	661

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 approved by our board of directors. 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.


Derivatives in Cash Flow Hedging Relationships	Location of Gain (Loss) Recognized in Income on Derivatives	Year Ended December 31,
		2020		2019		2018
Commodity contracts:
Gain (loss) recognized in other comprehensive income (loss) on derivatives	N/A	$	38	$	(6)	$	—
Gain reclassified from accumulated other comprehensive loss into income	Revenues	34		2		—

For cash flow hedges, no component of any derivative instrument’s gains or losses was excluded from the assessment of hedge effectiveness for the years ended December 31, 2020, 2019, and 2018. For the years ended December 31, 2020, 2019, and 2018, cash flow hedges primarily related to forward sales of renewable diesel. The estimated deferred after-tax loss that is expected to be reclassified into revenues over the next 12 months as a result of the hedged transactions that are forecasted to occur as of December 31, 2020 was immaterial. For the years ended December 31, 2020, 2019, and 2018, there were no amounts reclassified from accumulated other comprehensive loss into income as a result of the discontinuance of cash flow hedge accounting. The changes in accumulated other comprehensive loss by component, net of tax, for the years ended December 31, 2020, 2019, and 2018 are described in Note 12.

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 the 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	Year Ended December 31,
		2020		2019		2018
Commodity contracts	Revenues	$	—	$	5	$	—
Commodity contracts	Cost of materials and other	99		(68)		(165)
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	2		—		7
Foreign currency contracts	Cost of materials and other	27		(21)		56
Foreign currency contracts	Other income, net	(13)		75		(43)