Valero 2015 Annual Report Download - page 47

Table of Contents
•Increase in other refinery products margins - We experienced an increase in the margins of other refinery products relative to Brent
crude oil, such as petroleum coke and sulfur during 2014 compared to 2013. Margins for other refinery products were higher
during 2014 due to the decrease in the cost of crude oils during the year compared to 2013. For example, the benchmark price of
Brent crude oil was $99.57 per barrel in 2014 compared to $108.74 in 2013. We estimate that the increase in other refinery
products margins in 2014 had a positive impact to our refining margin of approximately $430 million.
• Decrease in distillate margins - We experienced a decrease in distillate margins in our U.S. Gulf Coast region primarily due to the
decrease in refined product prices . For example, the Brent-based benchmark reference margin for U.S. Gulf Coast ultra-low sulfur
diesel was $14.28 per barrel in 2014 compared to $15.95 per barrel in 2013, representing an unfavorable decrease of $1.67 per
barrel. We estimate that the decline in distillate margins in 2014 had a negative impact to our refining margin of approximately
$400 million.
The increase of $190 million in operating expenses was primarily due to a $128 million increase in energy costs related to higher
natural gas prices ($4.36 per MMBtu in 2014 compared to $3.69 per MMBtu in 2013) and a $22 million increase in maintenance
expense primarily related to higher levels of routine maintenance activities in 2014.
The increase of $31 million in depreciation and amortization expense was primarily due to additional depreciation expense of
$25 million associated with the new hydrocracker unit at our St. Charles Refinery that began operating in July 2013.
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Ethanol segment operating income was $786 million in 2014 compared to $491 million in 2013. The $295 million increase in operating
income was due primarily to a $399 million (or $0.29 per gallon) increase in gross margin, partially offset by a $100 million increase in
operating expenses.
The increase in ethanol gross margin of $399 million was due primarily to the following:
•Lower corn prices - Corn prices were lower in 2014 due to higher corn inventories in 2014 compared to 2013, which resulted
from a higher yielding harvest in 2013 compared to the drought-stricken harvest of 2012. For example, the CBOT corn price
was $4.16 per bushel in 2014 compared to $5.80 per bushel in 2013. The decrease in the price of corn that we processed during
2014 favorably impacted our ethanol margin by approximately $910 million.
• Lower ethanol prices - Ethanol prices were lower in 2014 due to higher ethanol inventories resulting from higher industry run
rates in 2014 as compared to 2013. The decrease in crude oil and gasoline prices in 2014 also contributed to the decrease in
ethanol prices. For example, the New York Harbor ethanol price was $2.37 per gallon in 2014 compared to $2.53 per gallon in
2013. The decrease in the price of ethanol per gallon during 2014 had an unfavorable impact to our ethanol margin of
approximately $260 million.
•Lower co-product prices - The decrease in corn prices in 2014 had a negative effect on the prices we received for corn-related
ethanol co-products, such as distillers grains and corn oil. The decrease in co-products prices had an unfavorable impact to our
ethanol segment margin of approximately $250 million.
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