Our crude oil and refined product inventories are stated at the lower of cost or market. Cost is
determined using the LIFO inventory valuation methodology and market is determined using current
estimated selling prices. Under the LIFO method, the most recently incurred costs are charged to
cost of sales and inventories are valued at the earliest acquisition costs. In periods of rapidly
declining prices, LIFO inventories may have to be written down to market due to the higher costs
assigned to LIFO layers in prior periods. In addition, the use of the LIFO inventory method may
result in increases or decreases to cost of sales in years such as 2006 when inventory volumes
decline and result...
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