Inventory

Refinery inventory consists of crude oil, work-in-process, refined products and blendstocks which are stated at the lower of cost or market. Cost of inventory for the Tyler refinery is determined under the last-in, first- out ("LIFO") valuation method and costs in excess of market value are charged to cost of goods sold. Cost of inventory for the El Dorado refinery is determined on a first-in, first-out ("FIFO") basis and costs in excess of net realizable value are charged to cost of goods sold.

Logistics inventory consists of refined products which are stated at the lower of FIFO cost or net realizable value.

Carrying value of inventories consisted of the following (in millions):



	March 31, 2017		December 31, 2016
Refinery raw materials and supplies	$	185.7	$	145.6
Refinery work in process	35.4		37.6
Refinery finished goods	170.0		200.3
Logistics refined products	6.3		8.9
Total inventories	$	397.4	$	392.4

Due to a lower crude oil and refined product pricing environment experienced since the end of 2014, market prices have declined to a level below the average cost of our inventories. At March 31, 2017, we recorded a pre-tax inventory valuation reserve of $18.9 million, $18.7 million of which related to LIFO inventory, which is subject to reversal in subsequent periods, not to exceed LIFO cost, should market prices recover. At December 31, 2016, we recorded a pre-tax inventory valuation reserve of $16.0 million, all of which related to LIFO inventory, which reversed in the first quarter of 2017, as the inventories associated with the valuation adjustment at the end of 2016 were sold or used. For the three months ended March 31, 2017 and 2016, we recognized net inventory valuation (losses) gains of $(2.9) million and $3.6 million, respectively, which were recorded as a component of cost of goods sold in the consolidated statements of income.

At March 31, 2017 and December 31, 2016, the excess of replacement cost (FIFO) over the carrying value (LIFO) of the Tyler refinery inventories was $1.1 million and $3.5 million, respectively.

Permanent Liquidations

We incurred a permanent reduction in a LIFO layer resulting in liquidation losses in our refinery inventory of a nominal amount and $3.3 million during the three months ended March 31, 2017 and 2016, respectively. These liquidation losses were recognized as a component of cost of goods sold.