Sunoco 2010 Annual Report Download - page 25

Environmental Matters
Sunoco is subject to extensive and frequently changing federal, state and local laws and regulations,
including, but not limited to, those relating to the discharge of materials into the environment or that otherwise
relate to the protection of the environment, waste management and the characteristics and composition of fuels.
As with the industry generally, compliance with existing and anticipated laws and regulations increases the
overall cost of operating Sunoco’s businesses. These laws and regulations have required, and are expected to
continue to require, Sunoco to make significant expenditures of both a capital and an expense nature. For
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. Although an increase or decrease in the price for crude oil may result in a
similar increase or decrease in prices for refined products, there may be a time lag in the realization of the similar
increase or decrease in prices for refined products. 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. The effect of
changes in crude oil prices on operating results therefore depends in part on how quickly refined product prices
adjust to reflect these changes. A substantial or prolonged increase in crude oil prices without a corresponding
increase in refined product prices, a substantial or prolonged decrease in refined product prices without a
corresponding decrease in crude oil prices, or a substantial or prolonged decrease in demand for refined products
could have a significant negative effect on our earnings and cash flows.
We may experience significant changes in our results of operations 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. Demand for
the refined products we manufacture also may be reduced due to a local or national recession, or other adverse
economic conditions, resulting in lower spending by businesses and consumers on gasoline and diesel fuel. 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. Additionally, due to the seasonality of refined products
markets and refinery maintenance schedules, results of operations for any particular quarter of a fiscal
year are not necessarily indicative of results for the full year.
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