Cash Concentration―Our cash equivalents are placed in high-quality commercial paper, money market funds and time deposits with major international banks and financial institutions.

Market Risks—We are exposed to market risks, such as changes in commodity pricing, currency exchange rates and interest rates. To manage the volatility related to these exposures, we selectively enter into derivative transactions pursuant to our risk management policies. Derivative instruments are recorded at fair value on the balance sheet. Gains and losses related to changes in the fair value of derivative instruments not designated as hedges are recorded in earnings. For derivatives that have been designated as fair value hedges, the gains and losses of the derivatives and hedged instruments are recorded in earnings. For derivatives that have been designated as cash flow hedges, the effective portion of the gains and losses is recorded through Other comprehensive income. The ineffective portion of cash flow hedges is recorded in earnings.

Marketable Securities—We invest cash in investment-grade securities for periods not exceeding two years. Investments in securities with original maturities of three months or less are classified as Cash and cash equivalents. At December 31, 2014 and 2013, we had marketable securities classified as Cash and cash equivalents of $431 million and $3,482 million, respectively.

Repurchase Agreements—In 2014, we invested in tri-party repurchase agreements. Under these agreements, we make cash purchases of securities according to a pre-agreed profile from our counterparties. The counterparties have an obligation to repurchase, and we have an obligation to sell, the same or substantially the same securities at a pre-defined date for a price equal to the purchase price plus interest. These securities, which pursuant to our policy are held by a third-party custodian and must generally have a minimum collateral value of 102%, secure the counterparty's obligation to repurchase the securities. Our investment in these tri-party repurchase agreements, which mature within the next twelve months, are treated as short-term loans receivable and are reflected in Prepaid expenses and other current assets on our Consolidated Balance Sheets. The balance of our investment at December 31, 2014 was $350 million.

Commodity Prices―We are exposed to commodity price volatility related to anticipated purchases of natural gas liquids, crude oil and other raw materials and sales of our products. We selectively use over-the-counter commodity swaps, options and exchange traded futures contracts with various terms to manage the volatility related to these risks. In addition, we are exposed to volatility on the prices of precious metals to the extent that we have obligations, classified as embedded derivatives, tied to the price of precious metals associated with secured borrowings. All aforementioned contracts are generally limited to durations of one year or less.

Foreign Currency Rates―We have significant worldwide operations. The functional currencies of our consolidated subsidiaries through which we operate are primarily the U.S. dollar and the euro. We enter into transactions denominated in currencies other than our designated functional currencies. As a result, we are exposed to foreign currency risk on receivables and payables. We maintain risk management control policies intended to monitor foreign currency risk attributable to both our outstanding foreign currency balances and future commitments. These control policies involve the centralization of foreign currency exposure management, the offsetting of exposures and the estimating of expected impacts of changes in foreign currency rates on our earnings. We enter into foreign currency forward contracts to reduce the effects of our net currency exchange exposures. At December 31, 2014, foreign currency forward contracts in the notional amount of $787 million, maturing in January 2015 to June 2015, were outstanding.

For forward contracts that economically hedge recognized monetary assets and liabilities in foreign currencies, no hedge accounting is applied. Changes in the fair value of foreign currency forward contracts, which are reported in the Consolidated Statements of Income, are offset in part by the currency translation results recognized on the assets and liabilities.

Foreign Currency Gain (Loss)―Other income (expense), net, in the Consolidated Statements of Income reflected a gain of $15 million and losses of $4 million and $21 million for 2014, 2013 and 2012, respectively.

Cross-Currency Swaps—In October 2014, to reduce our exposure to foreign currency exchange risk associated with certain intercompany loans, we entered into cross-currency swap contracts with an aggregate notional value of $2,000 million. Under the terms of these contracts, which have been designated as cash flow hedges, we will make interest payments in euros and receive interest in U.S. dollars. Upon the maturities of these contracts, we will pay the principal amount of the loans in euros and receive U.S. dollars from our counterparties.

We use the long-haul method to assess hedge effectiveness using a regression analysis approach under the hypothetical derivative method. We perform the regression analysis over an observation period of three years, utilizing data that is relevant to the hedge duration. We use the dollar offset method under the hypothetical derivative method to measure ineffectiveness.

In accordance with ASC 815, Derivatives and Hedging, the effective portion of the unrealized gains and losses on these cross-currency swap contracts will be reported in Accumulated other comprehensive income (loss) and reclassified to earnings over the period that the hedged intercompany loans affect earnings based on changes in spot rates. The ineffective portion of the unrealized gains and losses will be recorded directly to Other income (expense), net in the Consolidated Statements of Income. In addition, the swaps will be marked-to-market each reporting period with the euro notional values measured based on the current foreign exchange spot rate.

	December 31, 2014
	Expiration	Average		Notional		Fair
Millions of dollars, except expiration date and rates	Date	Interest Rate		Value		Value
Pay Euro	2021	4.55%	$	1,000	$	19
Receive U.S. dollars	0	6.00%

Pay Euro	2024	4.37%		1,000		16
Receive U.S. dollars	0	5.75%				0

Forward-Starting Interest Rate Swaps—In July 2013, we entered into forward-starting interest rate swaps with notional values totaling $1,500 million to hedge the intra-day risk of changes in the forward U.S. Treasury rates for fixed-rate debt issuances in 2013. These forward starting interest rate swaps were terminated contemporaneously with the pricing of $750 million of guaranteed notes due 2023 and $750 million of guaranteed notes due 2043. In February 2014, we entered into forward-starting interest rate swaps with a total notional value of $500 million to hedge the risk of fluctuations in the forward USD 30 Year LIBOR Swap rate for anticipated fixed-rate debt issuances in 2014. The swap was terminated upon issuance of the $1,000 million of guaranteed notes due 2044. We designated these forward-starting interest rate swaps as cash flow hedges.

We paid cash of $17 million to settle the liabilities related to these swaps agreements. The related deferred losses were recognized in AOCI and are being amortized as an increase to interest expense over the life of the related guaranteed note issuances using the effective interest method.

As of December 31, 2014, less than $1 million (on a pretax basis) is scheduled to be reclassified as an increase to interest expense over the next twelve months.

Fixed-for-Floating Interest Rate Swaps—During the third quarter of 2014, we entered into U.S. dollar fixed-for-floating interest rate swaps with third party financial institutions to mitigate changes in the fair value of our $2,000 million 5% senior notes due 2019 associated with the risk of variability in the 3 Month USD LIBOR rate (the benchmark interest rate). These interest rate swaps are used as part of our current interest rate risk management strategy to achieve a desired proportion of variable versus fixed rate debt.

Under these arrangements, we exchange fixed-for-floating rate interest payments to effectively convert our fixed-rate debt to floating-rate debt. The fixed and variable cash payments related to the interest rate swaps are net settled semi-annually and classified as Other, net, in the Cash flows from operating activities section of the Consolidated Statements of Cash Flows.

In accordance with ASC 815, we have elected to designate these fixed-for-floating interest rate swaps as fair value hedges. We use the long-haul method to assess hedge effectiveness using a regression analysis approach. We perform the regression analysis over an observation period of three years, utilizing data that is relevant to the hedge duration. We use the dollar offset method to measure ineffectiveness.

Changes in the fair value of the derivatives and changes in the value of the hedged items based on changes in the benchmark interest rate are recorded as Interest expense in our Consolidated Statements of Income. We evaluate the effectiveness of the hedging relationship periodically and calculate the changes in the fair value of the derivatives and the underlying hedged items separately. During the year ended December 31, 2014, we recognized a net gain of $17 million, related to the ineffectiveness of our hedging relationships.

At December 31, 2014, we had outstanding interest rate swap agreements with notional amounts of $2,000 million, maturing in April 15, 2019.

Available-for-Sale Securities—The following table summarizes the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale securities measured on a recurring basis that are outstanding as of December 31, 2014. Refer to Note 15 for additional information regarding the fair value of available-for-sale securities.

		December 31, 2014
				Gross		Gross
				Unrealized		Unrealized		Fair
Millions of dollars		Cost		Gains		Losses		Value
Commercial paper		$	1,029	$	1	$	- -	$	1,030
Bonds			414		- -		(1)		413
Certificates of deposit			150		- -		- -		150
	Total available-for-sale securities	$	1,593	$	1	$	(1)	$	1,593

As of December 31, 2014, the commercial paper securities held by the Company had maturities between one and twelve months, bonds had maturities between less than one and thirty-three months and certificates of deposit mature in thirteen months.

The fair value and unrealized losses related to available-for-sale securities that were in an unrealized loss position for less than twelve months as of December 31, 2014 were $489 million and $1 million, respectively.

We received gross proceeds of $1,751 million related to the maturity of certain available-for-sale securities during the year ended December 31, 2014. None of our available-for-sale securities were sold during 2014 and accordingly, there were no related realized gains or realized losses recognized during that time.

In addition, no losses related to other-than-temporary impairments of our available-for-sale investments have been recorded in Accumulated other comprehensive income (loss) during the year ended December 31, 2014.

Derivatives—The following table summarizes financial instruments outstanding as of December 31, 2014 and 2013 that are measured at fair value on a recurring basis. Refer to Note 15, Fair Value Measurement, for additional information regarding the fair value of derivative financial instruments.

					December 31, 2014				December 31, 2013
				Balance Sheet	Notional		Fair		Notional		Fair
Millions of dollars				Classification	Amount		Value		Amount		Value
Assets -
	Derivatives designated as cash flow hedges:
		Cross-currency swaps		Other assets	$	2,000	$	30	$	- -	$	- -
		Cross-currency swaps		Prepaid expenses		- -		5		- -		- -
				and other
				current assets
	Derivatives designated as fair value hedges:
		Fixed-for-floating interest rate		Other assets		2,000		10		- -		- -
			swaps
		Fixed-for-floating interest rate		Prepaid expenses		- -		6		- -		- -
			swaps	and other
				current assets
	Derivatives not designated as hedges:
		Commodities		Prepaid expenses		- -		2		- -		- -
				and other
				current assets
		Embedded derivatives		Prepaid expenses		77		3		47		3
				and other
				current assets
		Foreign currency		Prepaid expenses		107		- -		155		1
				and other
				current assets
	Non-derivatives:
		Available-for-sale securities		Short-term		1,587		1,593		- -		- -
				investments
					$	5,771	$	1,649	$	202	$	4
Liabilities -
	Derivatives not designated as hedges:
		Commodities		Accrued liabilities	$	28	$	1	$	646	$	4
		Foreign currency		Accrued liabilities		680		13		17		- -
	Non-derivatives:
		Performance share awards		Accrued liabilities		22		22		- -		- -
		Performance share awards		Other liabilities		14		14		14		14
					$	744	$	50	$	677	$	18

The following table summarizes the pretax effect of derivative instruments charged directly to income:

		Effect of Financial Instruments
		Year Ended December 31, 2014
				Gain (Loss)		Additional
		Gain (Loss)		Reclassified		Gain (Loss)
		Recognized		from AOCI		Recognized		Income Statement
Millions of dollars		in AOCI		to Income		in Income		Classification
Derivatives designated as cash-flow hedges:
	Cross-currency swaps	$	30	$	(89)	$	- -		Other income
									(expense), net
	Forward-starting interest rate swaps		(17)		- -		(1)	Interest expense
Derivatives designated as fair value hedges:
	Fixed-for-floating interest rate swaps		- -		- -		16	Interest expense
Derivatives not designated as hedges:
	Commodities		- -		- -		(8)	Cost of sales
	Embedded derivatives		- -		- -		2	Cost of sales
	Foreign currency		- -		- -		(54)	Other income
								(expense), net
		$	13	$	(89)	$	(45)

		Year Ended December 31, 2013
				Gain (Loss)		Additional
		Gain (Loss)		Reclassified		Gain (Loss)
		Recognized		from AOCI		Recognized		Income Statement
Millions of dollars		in AOCI		to Income		in Income		Classification
Derivatives not designated as hedges:
	Commodities	$	- -	$	- -	$	(12)	Cost of sales
	Embedded derivatives		- -		- -		25	Cost of sales
	Foreign currency		- -		- -		6	Other income
								(expense), net
		$	- -	$	- -	$	19

		Year Ended December 31, 2012
				Gain (Loss)		Additional
		Gain (Loss)		Reclassified		Gain (Loss)
		Recognized		from AOCI		Recognized		Income Statement
Millions of dollars		in AOCI		to Income		in Income		Classification
Derivatives not designated as hedges:
	Commodities	$	- -	$	- -	$	(23)	Cost of sales
	Embedded derivatives		- -		- -		5	Cost of sales
	Foreign currency		- -		- -		(15)	Other income
								(expense), net
		$	- -	$	- -	$	(33)

For the year ended December 31, 2014, the pretax effect of additional gain (loss) recognized in income for the fixed-for-floating interest rate swaps includes the net value for accrued interest of $6 million.