Sunoco 2009 Annual Report Download - page 24

additional information regarding Sunoco’s environmental matters, see “Environmental Matters” in
Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 7).
ITEM 1A. RISK FACTORS
In addition to the other information included in this Form 10-K, the following risk factors should be
considered in evaluating our business and future prospects. These risk factors represent what we believe to be the
known material risk factors with respect to us and our business. Our business, operating results, cash flows and
financial condition are subject to these risks and uncertainties, any of which could cause actual results to vary
materially from recent results or from anticipated future results.
Volatility in refined product and chemicals margins could materially affect our business and operating results.
Our profitability depends to a large extent upon the relationship between the price we pay for crude oil and
other feedstocks, and the wholesale prices at which we sell our refined products and chemicals. The volatility of
prices for crude oil and other feedstocks, refined products and chemicals, and the overall balance of supply and
demand for these commodities, could have a significant impact on this relationship. Retail marketing margins
also have been volatile, and vary with wholesale prices, the level of economic activity in our marketing areas and
as a result of various logistical factors. In many cases, it is very difficult to increase refined product and chemical
prices quickly enough to recover increases in the costs of products being sold. We may experience significant
changes in our results of operations also due to planned or announced additions to refining capacity by our
competitors, variations in the level of refined product imports into the United States, changes in product mix
(including increasing usage of renewable biofuels) or competition in pricing. In addition, our profit margins may
decline as a direct result of unpredictable factors in the global marketplace, many of which are beyond our
control, including:
•Cyclical nature of the businesses in which we operate: Refined product inventory levels and demand,
crude oil price levels and availability and refinery utilization rates are all cyclical in nature.
Historically, both the chemicals industry and the refining industry have experienced periods of actual
or perceived inadequate capacity and tight supply, causing prices and profit margins to increase, and
periods of actual or perceived excess capacity, resulting in oversupply and declining capacity
utilization rates, prices and profit margins. The cyclical nature of these businesses results in volatile
profits and cash flows over the business cycle.
•Changes in energy and raw material costs: We purchase large amounts of energy and raw materials for
our businesses. The aggregate cost of these purchases represents a substantial portion of our cost of
doing business. The prices of energy and raw materials generally follow price trends for crude oil and
natural gas, which may be highly volatile and cyclical. Furthermore, across our businesses, there are a
limited number of suppliers for some of our raw materials and utilities and, in some cases, the number
of sources for and availability of raw materials are specific to the particular geographic region in which
a facility is located. Accordingly, if one of these suppliers were unable to meet its obligations under
present supply arrangements or were unwilling to sell to us, we could suffer reduced supplies or be
forced to incur increased costs for our raw materials.
•Geopolitical instability: Instability in the global economic and political environment can lead to
volatility in the costs and availability of energy and raw materials, and in the prices for refined products
and chemicals. This may place downward pressure on our results of operations. This is particularly true
of developments in and relating to oil-producing countries, including terrorist activities, military
conflicts, embargoes, internal instability or actions or reactions of governments in anticipation of, or in
response to, such developments.
•Changes in transportation costs: We utilize the services of third parties to transport crude oil and
refined products to and from our refineries. The cost of these services is significant and prevailing rates
can be very volatile depending on market conditions. Increases in crude oil or refined product
transportation rates could result in increased raw material costs or product distribution costs.
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