Inventories

Inventory consists of the following components:



	September 30, 2018			December 31, 2017
	(In thousands)
Crude oil	$	529,252		$	581,417
Other raw materials and unfinished products⁽¹⁾	383,953			396,618
Finished products⁽²⁾	753,562			655,336
Lower of cost or market reserve	(30,906		)	(223,833		)
Process chemicals⁽³⁾	35,259			24,792
Repair and maintenance supplies and other ⁽⁴⁾	191,380			195,762
Total inventory	$	1,862,500		$	1,630,092


(1)	Other raw materials and unfinished products include feedstocks and blendstocks, other than crude.


(2)	Finished products include gasolines, jet fuels, diesels, lubricants, asphalts, LPG’s and residual fuels.


(3)	Process chemicals include additives and other chemicals.


(4)	Includes RINs.

Inventories, which are valued at the lower of LIFO cost or market, reflect a valuation reserve of $30.9 million and $223.8 million at September 30, 2018 and December 31, 2017, respectively. The December 31, 2017 market reserve of $223.8 million was reversed due to the sale of inventory quantities that gave rise to the 2017 reserve. A new market reserve of $30.9 million was established as of September 30, 2018 based on market conditions and prices at that time. The effect of the change in lower of cost or market reserve was an increase to cost of products sold totaling $17.8 million for the three months ended September 30, 2018 and a decrease of $111.1 million for the three months ended September 30, 2017, and a decrease to cost of products sold totaling $192.9 million and $15.3 million for the nine months ended September 30, 2018 and 2017, respectively.

During the three months ended June 30, 2018, the EPA granted the Woods Cross Refinery a one-year small refinery exemption from the Renewable Fuel Standard (“RFS”) program requirements for the 2017 calendar year end. As a result, the Woods Cross Refinery’s gasoline and diesel production are not subject to the percentage of production that must satisfy a Renewable Volume Obligation (“RVO”) for 2017. In the second quarter of 2018, we increased our inventory of RINs and reduced our cost of products sold by $25.3 million, representing the net cost of the Woods Cross Refinery’s RINs charge to cost of products sold in 2017, less the loss incurred for selling 2017 vintage RINs in excess of those which we can use subject to the 20% carryover limit.

During the three months ended March 31, 2018, the EPA granted the Cheyenne Refinery a one-year small refinery exemption from the RFS program requirements for the 2015 and 2017 calendar years end. As a result, the Cheyenne Refinery’s gasoline and diesel production are not subject to the percentage of production that must satisfy an RVO for those years. At the date we received the 2017 Cheyenne Refinery exemption, we had not yet submitted RINs to the EPA to satisfy this 2017 RVO, which we intended to satisfy, in part, with 2016 vintage RINs subject to the 20% carryover limit. In the first quarter of 2018, we increased our inventory of RINs and reduced our cost of products sold by $37.9 million, representing the net cost of the Cheyenne Refinery’s RINs charged to cost of products sold in 2017, less the loss incurred from selling 2016 vintage RINs prior to their expiration in 2018.

In the first quarter of 2018, the EPA allowed us to generate new 2018 vintage RINs to replace the RINs previously submitted to meet the Cheyenne Refinery’s 2015 RVO. In the first quarter of 2018, we increased our inventory of RINs and reduced our cost of products sold by $33.8 million representing the fair value of the 2018 RINs generated because of the Cheyenne Refinery’s exemption of its 2015 RVO.

During the second quarter of 2018, the Renewable Fuel Association and three other associations sought judicial review of three hardship waivers granted by the EPA under the RFS provisions of the Clean Air Act by filing a lawsuit in the United States Court of Appeals for the Tenth Circuit (“Tenth Circuit”) that alleges the EPA erred in granting the waivers. This challenge includes two hardship waivers granted to our subsidiaries for the 2016 compliance year. The Tenth Circuit granted our motion to intervene in the case, thereby making us a party to this case. It is too early to assess whether the case is expected to have any impact on us.