Sunoco 2011 Annual Report Download - page 24

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We purchase crude oil from different regions throughout the world, including a significant portion from
West Africa, and we are subject to the political, geographic and economic risks of doing business with suppliers
located in these regions, including:
• trade barriers;
• national and regional labor strikes;
• political unrest;
• increases in duties and taxes;
• changes in contractual terms; and
• changes in laws and policies governing foreign companies.
Substantially all of these purchases are made in the spot market, or under short-term contracts. In the event
that we are unable to obtain crude oil in the spot market, or one or more of our supply arrangements is terminated
or cannot be renewed, we will need to find alternative sources of supply. In addition, we could experience an
interruption of supply or an increased cost to deliver refined products to market if the ability of the pipelines or
vessels to transport crude oil or refined products is disrupted because of accidents, governmental regulation or
third-party action. If we cannot obtain adequate crude oil volumes of the type and quality we require, or if we are
able to obtain such types and volumes only at unfavorable prices, our results of operations could be affected in a
materially adverse way.
Upon our exit from the refining business, we will be entirely dependent upon third parties for the supply of
refined products such as gasoline and diesel for our retail marketing business.
Currently, a substantial percentage of the refined products we sell in our retail marketing facilities in the
northeast United States are manufactured at our refinery in Philadelphia, PA. After our exit from refining
operations, we will be required to purchase these products from other manufacturers. We may also need to
contract for new ships, barges, pipelines or terminals which we have not historically used to transport these
products to our markets. The inability to acquire refined products and any required transportation services at
prices no less favorable than the market-based transfer price between our Refining and Supply and Retail
Marketing business segments or the failure of our suppliers to deliver product in accordance with our supply
agreements may have a material adverse impact on our business or results of operations.
The adoption of derivatives legislation by the United States Congress could have an adverse effect on our
ability to hedge risks associated with our business.
We use swaps, options, futures, forwards and other derivative instruments to hedge a variety of commodity
price risks and to achieve ratable pricing of crude oil purchases, to convert certain expected refined product sales
to fixed or floating prices, to lock in what we consider to be acceptable margins for various refined products and
to lock in the price of a portion of our electricity and natural gas purchases or sales and transportation costs. We
do not hold or issue derivative instruments for speculative purposes. The United States Congress recently
adopted comprehensive financial reform legislation that establishes federal oversight and regulation of the
over-the-counter derivatives market and entities, such as us, that participate in that market. The new legislation
was signed into law by the President on July 21, 2010, and required the Commodities Futures Trading
Commission (the “CFTC”) and the SEC to promulgate rules and regulations implementing the new legislation.
The CFTC also has proposed regulations to set position limits for certain futures and option contracts in the
major energy markets, although it is not possible at this time to predict whether or when the CFTC will adopt
those rules or include comparable provisions in its rulemaking under the new legislation. The financial reform
legislation may also require us to comply with margin requirements in connection with our derivative activities,
although the application of those provisions to us is uncertain at this time. The financial reform legislation also
requires many counterparties to our derivative instruments to spin off some of their derivatives activities to a
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