filings.toolsItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
COMMODITY PRICE RISK
We are exposed to market risks related to the volatility in the price of feedstocks (primarily crude oil, waste and renewable feedstocks, and corn), the products we produce, and natural gas used in our operations. To reduce the impact of price volatility on our results of operations and cash flows, we use commodity derivative instruments, including futures and options to manage the volatility of:
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inventories and firm commitments to purchase inventories generally for amounts by which our current year inventory levels (determined on a LIFO basis) differ from our previous year-end LIFO inventory levels; and
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forecasted purchases and/or product sales at existing market prices that we deem favorable.
Our positions in commodity derivative instruments are monitored and managed on a daily basis by our risk control group to ensure compliance with our stated risk management policy that has been approved by our Board.
As of December 31, 2022 and 2021, the amount of gain or loss that would have resulted from a 10 percent increase or decrease in the underlying price for all of our commodity derivative instruments entered into for purposes other than trading with which we have market risk was not material. See Note 19 of Notes to Consolidated Financial Statements for notional volumes associated with these derivative contracts as of December 31, 2022.
COMPLIANCE PROGRAM PRICE RISK
We are exposed to market risk related to the volatility in the price of credits needed to comply with the Renewable and Low-Carbon Fuel Programs. To manage this risk, we enter into contracts to purchase these credits. As of December 31, 2022 and 2021, the amount of gain or loss in the fair value of derivative instruments that would have resulted from a 10 percent increase or decrease in the underlying price of the contracts was not material. See Note 19 of Notes to Consolidated Financial Statements for a discussion about these blending programs.
INTEREST RATE RISK
The following tables provide information about our debt instruments (dollars in millions), the fair values of which are sensitive to changes in interest rates. A 10 percent increase or decrease in our floating interest rates would not have a material effect to our results of operations. Principal cash flows and related weighted-average interest rates by expected maturity dates are presented. See Note 8 of Notes to Consolidated Financial Statements for additional information related to our debt.
| December 31, 2022 (a) | |||||||||||||||||||||||||||||||||||||||||||||||
| Expected Maturity Dates | |||||||||||||||||||||||||||||||||||||||||||||||
| 2023 | 2024 | 2025 | 2026 | 2027 | There- after | Total | Fair Value | ||||||||||||||||||||||||||||||||||||||||
| Fixed rate | $ | — | $ | 167 | $ | 441 | $ | 672 | $ | 578 | $ | 6,606 | $ | 8,464 | $ | 8,041 | |||||||||||||||||||||||||||||||
| Average interest rate | — | % | 1.2 | % | 3.2 | % | 4.2 | % | 2.2 | % | 5.3 | % | 4.8 | % | |||||||||||||||||||||||||||||||||
| Floating rate | $ | 861 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 861 | $ | 861 | |||||||||||||||||||||||||||||||
| Average interest rate | 7.1 | % | — | % | — | % | — | % | — | % | — | % | 7.1 | % |
| December 31, 2021 (a) | |||||||||||||||||||||||||||||||||||||||||||||||
| Expected Maturity Dates | |||||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2023 | 2024 | 2025 | 2026 | There- after | Total | Fair Value | ||||||||||||||||||||||||||||||||||||||||
| Fixed rate | $ | 300 | $ | — | $ | 169 | $ | 1,374 | $ | 1,726 | $ | 7,637 | $ | 11,206 | $ | 12,838 | |||||||||||||||||||||||||||||||
| Average interest rate | 4.0 | % | — | % | 1.2 | % | 3.0 | % | 3.9 | % | 5.0 | % | 4.5 | % | |||||||||||||||||||||||||||||||||
| Floating rate | $ | 810 | $ | 20 | $ | — | $ | — | $ | — | $ | — | $ | 830 | $ | 830 | |||||||||||||||||||||||||||||||
| Average interest rate | 3.5 | % | 3.9 | % | — | % | — | % | — | % | — | % | 3.5 | % |
(a)Excludes unamortized discounts and debt issuance costs.
FOREIGN CURRENCY RISK
We are exposed to exchange rate fluctuations on transactions related to our foreign operations that are denominated in currencies other than the local (functional) currencies of those operations. To manage our exposure to these exchange rate fluctuations, we often use foreign currency contracts. As of December 31, 2022 and 2021, the fair value of our foreign currency contracts was not material.
See Note 19 of Notes to Consolidated Financial Statements for a discussion about our foreign currency risk management activities.
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