Inventories

9 Months Ended

Sep. 30, 2022

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):

	September 30,		December 31,
	2022		2021
Distillates: home heating oil, diesel and kerosene	$	116,792	$	244,067
Gasoline		130,261		123,824
Gasoline blendstocks		46,915		50,599
Crude oil		2,618		3,678
Residual oil		97,960		60,286
Renewable identification numbers (RINs)		3,418		4,218
Convenience store inventory		29,767		22,845
Total	$	427,731	$	509,517

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 $0.7 million and $1.3 million at September 30, 2022 and December 31, 2021, respectively. Negative exchange balances are accounted for as accounts payable and amounted to $38.5 million and $20.6 million at September 30, 2022 and December 31, 2021, respectively. Exchange transactions are valued using current carrying costs.