HollyFrontier 2015 Annual Report Download - page 30

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Table of Content
22
Item 1A. Risk Factors
Investing in us involves a degree of risk, including the risks described below. Our operating results have been, and will continue
to be, affected by a wide variety of risk factors, many of which are beyond our control, that could have adverse effects on profitability
during any particular period. You should carefully consider the following risk factors together with all of the other information
included in this Annual Report on Form 10-K, including the financial statements and related notes, when deciding to invest in us.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and
adversely affect our business operations. If any of the following risks were to actually occur, our business, financial condition or
results of operations could be materially and adversely affected.
The headings provided in this Item 1A. are for convenience and reference purposes only and shall not affect or limit the extent or
interpretation of the risk factors.
The prices of crude oil and refined products materially affect our profitability, and are dependent upon many factors that are
beyond our control, including general market demand and economic conditions, seasonal and weather-related factors, regional
and grade differentials and governmental regulations and policies.
Among these factors is the demand for crude oil and refined products, which is largely driven by the conditions of local and
worldwide economies as well as by weather patterns and the taxation of these products relative to other energy sources.
Governmental regulations and policies, particularly in the areas of taxation, energy and the environment, also have a significant
impact on our activities. Operating results can be affected by these industry factors, product and crude pipeline capacities, crude
oil differentials (including regional and grade differentials), changes in transportation costs, accidents or interruptions in
transportation, competition in the particular geographic areas that we serve, and factors that are specific to us, such as the success
of particular marketing programs and the efficiency of our refinery operations. The demand for crude oil and refined products can
also be reduced due to a local or national recession or other adverse economic condition that results in lower spending by businesses
and consumers on gasoline and diesel fuel, higher gasoline prices due to higher crude oil prices, a shift by consumers to more
fuel-efficient vehicles or alternative fuel vehicles (such as ethanol or wider adoption of gas/electric hybrid vehicles), or an increase
in vehicle fuel economy, whether as a result of technological advances by manufacturers, legislation mandating or encouraging
higher fuel economy or the use of alternative fuel.
We do not produce crude oil and must purchase all our crude oil, the price of which fluctuates based upon worldwide and local
market conditions. Our profitability depends largely on the spread between market prices for refined petroleum products and crude
oil prices. This margin is continually changing and may fluctuate significantly from time to time. Crude oil and refined products
are commodities whose price levels are determined by market forces beyond our control. For example, the reversal of certain
existing pipelines or the construction of certain new pipelines transporting additional crude oil or refined products to markets that
serve competing refineries could affect the market dynamic that has allowed us to take advantage of favorable pricing. Also, in
December 2015, the U.S. Congress lifted the ban on the ability of producers to export domestic crude oil. This could potentially
impact crack spreads and price differentials between domestic and foreign crude oils. A deterioration of crack spreads or price
differentials between domestic and foreign crude oils could have a material adverse effect on our business, financial condition,
results of operations and cash flows.