Sunoco 2009 Annual Report Download - page 22

Competition
In all of its operations, Sunoco is subject to competition, both from companies in the industries in which it
operates and from companies in other industries that produce similar products.
The refining and marketing business is very competitive. Sunoco competes with a number of other domestic
refiners and marketers in the eastern half of the United States, with integrated oil companies, with foreign
refiners that import products into the United States and with producers and marketers in other industries
supplying alternative forms of energy and fuels to satisfy the requirements of the Company’s industrial,
commercial and individual consumers. Some of Sunoco’s competitors have expanded capacity of their refineries
and internationally new refineries are coming on line which could also affect the Company’s competitive
position.
Profitability in the refining and marketing industry depends largely on refined product margins, which can
fluctuate significantly, as well as operating efficiency, product mix, and costs of product distribution and
transportation. Certain of Sunoco’s competitors that have larger and more complex refineries may be able to
realize lower per-barrel costs or higher margins per barrel of throughput. Several of Sunoco’s principal
competitors are integrated national or international oil companies that are larger and have substantially greater
resources than Sunoco. Because of their integrated operations and larger capitalization, these companies may be
more flexible in responding to volatile industry or market conditions, such as shortages of feedstocks or intense
price fluctuations. Refining margins are frequently impacted by sharp changes in crude oil costs, which may not
be immediately reflected in product prices.
The refining industry is highly competitive with respect to feedstock supply. Unlike certain of its
competitors that have access to proprietary sources of controlled crude oil production available for use at their
own refineries, Sunoco obtains substantially all of its crude oil and other feedstocks from unaffiliated sources.
The availability and cost of crude oil is affected by global supply and demand. Most of the crude oils processed
in Sunoco’s refining system are light-sweet crude oils. Management believes that a diverse supply of light-sweet
crude oils will continue to be available.
Sunoco also faces strong competition in the market for the sale of retail gasoline and merchandise. Sunoco’s
competitors include service stations of large integrated oil companies, independent gasoline service stations,
convenience stores, fast food stores, and other similar retail outlets, some of which are well-recognized national
or regional retail systems. The number of competitors varies depending on the geographical area. It also varies
with gasoline and convenience store offerings. The principal competitive factors affecting Sunoco’s retail
marketing operations include site location, product price, selection and quality, site appearance and cleanliness,
hours of operation, store safety, customer loyalty and brand recognition.
Sunoco competes by pricing gasoline competitively, combining its retail gasoline business with convenience
stores that provide a wide variety of products, and using advertising and promotional campaigns. Sunoco believes
that it is in a position to compete effectively as a marketer of refined products because of the location of its
refineries and retail network which are well integrated with the distribution system owned by Sunoco Logistics
Partners L.P., the master limited partnership that is 33 percent owned by Sunoco.
Sunoco’s chemical business is largely a commodities business and competes with local, regional, national
and international companies, some of which have greater financial, research and development, production and
other resources than Sunoco. Although competitive factors may vary among product lines, in general, Sunoco’s
competitive position is primarily based on raw material costs, selling prices, product quality, manufacturing
technology, access to new markets, proximity to the market and customer service and support. Sunoco’s
competitors can be expected in the future to improve technologies, expand capacity, and, in certain product lines,
develop and introduce new products.
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