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 19), as summarized below under “Fair Values of Derivative Instruments.” The effect of these derivative instruments on our income is summarized below under “Effect of Derivative Instruments on Income.”

We are exposed to market risks related to the volatility in the price of crude oil, refined petroleum products (primarily gasoline and distillate), renewable diesel, grain (primarily corn), renewable diesel feedstocks, 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.

As of December 31, 2019, 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
	2020	2021
Derivatives designated as cash flow hedges
Renewable diesel:
Futures – long	995	—
Futures – short	2,492	—

Derivatives designated as economic hedges
Crude oil and refined petroleum products:
Futures – long	73,348	2
Futures – short	76,045	—
Options – long	1,550	—
Options – short	1,550	—
Corn:
Futures – long	50,120	—
Futures – short	66,575	295
Physical contracts – long	22,055	306

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 our 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, 2019, we had foreign currency contracts to purchase $739 million of U.S. dollars and $2.3 billion of U.S. dollar equivalent Canadian dollars. All of these commitments matured on or before February 15, 2020.

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 products 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, 2019, 2018, and 2017, the cost of meeting our obligations under these compliance programs was $318 million, $536 million, and $942 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 19. 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 the majority of these costs from our customers for the years ended December 31, 2019, 2018, and 2017 and expect to continue to recover the majority of these costs in the future. For the years ended December 31, 2019, 2018, and 2017, 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, 2019 and 2018 (in millions) and the line items in the balance sheets in which the fair values are reflected. See Note 19 for additional information related to the fair values of our derivative instruments.

As indicated in Note 19, 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, 2019				December 31, 2018
	Balance Sheet Location	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Derivatives designated as hedging instruments
Commodity contracts	Receivables, net	$	9	$	20	$	—	$	—

Derivatives not designated as hedging instruments
Commodity contracts	Receivables, net	$	608	$	648	$	2,792	$	2,681
Physical purchase contracts	Inventories	—		3		—		5
Foreign currency contracts	Receivables, net	27		—		4		—
Foreign currency contracts	Accrued expenses	—		10		—		1
Total		$	635	$	661	$	2,796	$	2,687

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.

The following table provides information about the gain (loss) recognized in income on our derivative instruments 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,
Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	2019			2018			2017
Commodity contracts	Revenues	$	5		$	—		$	—
Commodity contracts	Cost of materials and other	(68		)	(165		)	(278		)
Commodity contracts	Operating expenses (excluding depreciation and amortization expense)	—			7			—
Foreign currency contracts	Cost of materials and other	(21		)	56			(40		)
Foreign currency contracts	Other income, net	75			(43		)	—