Derivatives

12 Months Ended

Dec. 31, 2012

Derivatives

19. Derivatives

For further information regarding the fair value measurement of derivative instruments, see Note 18. See Note 2 for a discussion of the types of derivatives we use and the reasons for them. We do not designate any of our commodity derivative instruments as hedges for accounting purposes. Our interest rate derivative instruments were designated as fair value accounting hedges.

The following table presents the gross fair values of derivative instruments, excluding cash collateral, and where they appear on the consolidated balance sheets as of December 31, 2012 and 2011:

	December 31, 2012
(In millions)	Asset		Liability		Balance Sheet Location
Commodity derivatives	$	49	$	88	Other current assets
	December 31, 2011
(In millions)	Asset		Liability		Balance Sheet Location
Commodity derivatives	$	26	$	45	Other current assets
Interest rate derivatives		19		-	Other noncurrent assets
Commodity derivatives		1		1	Other current liabilities

Derivatives Designated as Fair Value Accounting Hedges

In 2012, we terminated interest rate swap agreements with a notional amount of $500 million that had been entered into as fair value accounting hedges on our 3.50 percent senior notes due in March 2016. There was a $20 million gain on the termination of the transactions, which has been accounted for as an adjustment to our long-term debt balance. The gain is being amortized over the remaining life of the 3.50 percent senior notes, which reduces our interest expense. The interest rate swaps had no accounting hedge ineffectiveness.

The following table summarizes the pretax effect of derivative instruments designated as accounting hedges of fair value in our consolidated statements of income:

		Gain (Loss)
(In millions)	Income Statement Location	2012		2011		2010
Derivative
Interest rate	Net interest and other financial income (costs)	$	1	$	19	$	-
Hedged Item
Long-term debt	Net interest and other financial income (costs)	$	(1)	$	(19)	$	-

Derivatives not Designated as Accounting Hedges

Derivatives that are not designated as accounting hedges may include commodity derivatives used to hedge price risk on (1) inventories, (2) fixed price sales of refined products, (3) the acquisition of foreign-sourced crude oil and (4) the acquisition of ethanol for blending with refined products.

The table below summarizes open commodity derivative contracts as of December 31, 2012.

	Position		Total Barrels   (In  thousands)
Crude oil(a)
Exchange-traded		Long		15,643
Exchange-traded		Short		(26,191	)
Refined Products(a)
Exchange-traded		Long		2,720
Exchange-traded		Short		(3,429	)

^(a)      100 percent of these contracts expire in the first quarter of 2013.

The following table summarizes the effect of all commodity derivative instruments in our consolidated statements of income:

(In millions)	Gain (Loss)
Income Statement Location	2012		2011		2010
Sales and other operating revenues	$	8	$	(34)	$	(1)
Other income		-		1		6
Cost of revenues		65		182		(28)
Total	$	73	$	149	$	(23)