Sunoco 2011 Annual Report Download - page 23

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•Impact of environmental and other regulations affecting the composition of gasoline and other refined
products: Governmental regulations and policies, particularly in the areas of taxation, energy and the
environment, also have a significant impact on our activities. Federally mandated standards for use of
renewable biofuels, such as ethanol and biodiesel in the production of refined products, are
transforming traditional gasoline and diesel markets in North America. These regulatory mandates
present production and logistical challenges for both the petroleum refining and ethanol industries, and
may require additional capital expenditures or expenses by us. We may have to enter into arrangements
with other parties to meet our obligations to use advanced biofuels, with potentially uncertain supplies
of these new fuels. If we are unable to obtain or maintain sufficient quantities of ethanol to support our
blending needs, our sale of ethanol blended gasoline could be interrupted or suspended which could
result in lower profits. There also will be compliance costs related to these regulations. We may
experience a decrease in demand for refined petroleum products due to new federal requirements for
increased fleet mileage per gallon or due to replacement of refined petroleum products by renewable
fuels. In addition, tax incentives and other subsidies making renewable fuels more competitive with
refined petroleum products may reduce refined petroleum product margins and the ability of refined
petroleum products to compete with renewable fuels. A structural expansion of production capacity for
such renewable biofuels could lead to significant increases in the overall production, and available
supply, of gasoline and diesel in markets that we supply. This potential increase in supply of gasoline
and diesel could result in lower refining margins for us, particularly in the event of a contemporaneous
reduction in demand, or during periods of sustained low demand for such refined products. In addition,
a significant 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, or otherwise, also could lead to a decrease in
demand, and reduced margins, for the refined petroleum products that we market and sell.
It is possible that any, or a combination, of these occurrences could have a material adverse effect on our
business or results of operations. It is also likely that the current and future anticipated impacts of these factors
may have a material adverse effect on the likelihood of our successful completion of a sale of our refining assets
and the ultimate value which may be realized upon such sale.
Changes in general economic, financial and business conditions could have a material effect on our business
or results of operations.
Weakness in general economic, financial and business conditions can lead to a decline in the demand for the
refined products that we sell. Such weakness can also lead to lower demand for transportation and storage
services provided by us. It is possible that any, or a combination, of these occurrences could have a material
adverse effect on our business or results of operations.
Weather conditions and natural disasters could materially and adversely affect our business and operating
results.
The effects of weather conditions and natural disasters can lead to volatility in the costs and availability of
energy and raw materials, which can negatively impact our operations or those of our customers and suppliers.
Prior to our exit from the refining business, our inability to obtain adequate supplies of crude oil could affect
our business in a materially adverse way.
We currently meet all of our crude oil requirements through purchases from third parties. Most of the crude
oil processed at our refineries is light-sweet crude oil. It is possible that an adequate supply of crude oil or other
feedstocks may not be available to our refineries to sustain our current level of refining operations. In addition,
our inability to process significant quantities of less-expensive heavy-sour crude oil could be a competitive
disadvantage.
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