Inventories

6 Months Ended

Jun. 30, 2020

Inventories

Inventories

Note 4.    Inventories

The Partnership hedges substantially all of its petroleum and ethanol inventory using a variety of instruments, primarily exchange-traded futures contracts. These futures contracts are entered into when inventory is purchased and are either designated as fair value hedges against the inventory on a specific barrel basis for inventories qualifying for fair value hedge accounting or not designated and maintained as economic hedges against certain inventory of the Partnership on a specific barrel basis. Changes in fair value of these futures contracts, as well as the offsetting change in fair value on the hedged inventory, are recognized in earnings as an increase or decrease in cost of sales. All hedged inventory designated in a fair value hedge relationship is valued using the lower of cost, as determined by specific

identification, or net realizable value, as determined at the product level. All petroleum and ethanol inventory not designated in a fair value hedging relationship is carried at the lower of historical cost, on a first-in, first-out basis, or net realizable value. Renewable Identification Numbers (“RINs”) inventory is carried at the lower of historical cost, on a first-in, first-out basis, or net realizable value. Convenience store inventory is carried at the lower of historical cost, based on a weighted average cost method, or net realizable value.

Inventories consisted of the following (in thousands):

	June 30,		December 31,
	2020		2019
Distillates: home heating oil, diesel and kerosene	$	173,970	$	222,202
Gasoline		72,417		120,958
Gasoline blendstocks		30,490		39,702
Crude oil		22,315		16,018
Residual oil		21,786		26,521
Propane and other		45		1,356
Renewable identification numbers (RINs)		687		1,329
Convenience store inventory		22,316		22,396
Total	$	344,026	$	450,482

The decrease in inventories, with the exception of convenience store inventory and RINs, is due to lower prices at June 30, 2020 compared to December 31, 2019.

In addition to its own inventory, the Partnership has exchange agreements for petroleum products and ethanol with unrelated third-party suppliers, whereby it may draw inventory from these other suppliers and suppliers may draw inventory from the Partnership. Positive exchange balances are accounted for as accounts receivable and amounted to $5.7 million and $9.2 million at June 30, 2020 and December 31, 2019, respectively. Negative exchange balances are accounted for as accounts payable and amounted to $5.4 million and $17.6 million at June 30, 2020 and December 31, 2019, respectively. Exchange transactions are valued using current carrying costs.