Valero 2015 Annual Report Download - page 38

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to $2.79 per barrel in 2014, representing an unfavorable decrease of $0.42 per barrel. Another example is Maya crude oil (a type of
sour crude oil) that sold at a discount of $9.54 per barrel to Brent crude oil in 2015 compared to a discount of $13.73 per barrel in
2014, representing an unfavorable decrease of $4.19 per barrel. We estimate that the narrowing of the discounts for sweet crude oils
and sour crude oils that we processed during 2015 had an unfavorable impact to our refining margin of approximately $260 million
and $770 million, respectively.
•Lower benefit from processing other feedstocks - In addition to crude oil, we use other feedstocks and blendstocks in our refining
processes, such as natural gas. When combined with steam, natural gas produces hydrogen that is used in our hydrotreater and
hydrocracker processing units to produce refined products. Although natural gas costs declined from 2014 to 2015, the decline was
not as significant as the decline in the cost of Brent crude oil; therefore, the benefit we normally derive by using natural gas as a
feedstock declined. We estimate that the decline in the benefit we derived from processing other feedstocks had an unfavorable
impact to our refining margin of approximately $980 million in 2015 compared to 2014.
•Decrease in distillate margins - We experienced a decrease in distillate margins throughout all our regions during 2015. For
example, the WTI-based benchmark reference margin for U.S. Mid-Continent ultra-low-sulfur diesel (a type of distillate) was
$19.02 per barrel in 2015 compared to $24.05 per barrel in 2014, an unfavorable decrease of $5.03 per barrel. Another example is
the Brent-based benchmark reference margin for U.S. Gulf Coast ultra-low-sulfur diesel that was $12.64 per barrel in 2015
compared to $14.28 per barrel in 2014, an unfavorable decrease of $1.64 per barrel. We estimate that the decrease in distillate
margins per barrel in 2015 compared to 2014 had an unfavorable impact to our refining margin of approximately $650 million.
•Higher throughput volumes - Refining throughput volumes increased by 34,000 BPD in 2015. We estimate that the increase in
refining throughput volumes had a positive impact to our refining margin of approximately $160 million in 2015.
The decrease of $105 million in operating expenses was primarily due to a $196 million decrease in energy costs driven by lower
natural gas prices ($2.58 per MMBtu in 2015 compared to $4.36 per MMBtu in 2014). This decrease in energy costs was partially offset
by a $47 million increase in employee-related expenses primarily due to higher employee benefit costs and incentive compensation
expenses, and a $26 million increase in costs associated with higher levels of maintenance activities in 2015.
The increase of $148 million in depreciation and amortization expense was primarily associated with the impact of new capital projects
that began operating in 2015 and higher refinery turnaround and catalyst amortization.
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Ethanol segment operating income was $142 million in 2015 compared to $786 million in 2014. Excluding the effect of the lower of
cost or market inventory valuation adjustment of $50 million in 2015 and the LIFO gain of $4 million in 2014, our ethanol segment
operating income decreased $590 million. This decrease was primarily due to a $628 million (or $0.57 per gallon) decrease in gross
margin, partially offset by a $39 million decrease in operating expenses.
The decrease in ethanol gross margin of $628 million was due primarily to the following:
• Lower ethanol prices - Ethanol prices were lower in 2015 primarily due to the decrease in crude oil and gasoline prices in 2015
compared to 2014. For example, the New York Harbor ethanol price was $1.59 per
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