and can be affected by the global and regionalsupply-and-demand balance for refined products and by changes in the price of crude oil used for refinery feedstock. Industry margins can also be influenced by refined-product inventory levels, geopolitical events, cost of materials and services, refinery maintenance programs and disruptions at refineries resulting from unplanned outages due to severe weather, fires or other operational events.

     Other factors affecting profitability for downstream operations include the reliability and efficiency of the company’s refining and marketing network and the effectiveness of the crude-oil and product-supply functions. Profitability can also be affected by the volatility of tanker-charter rates for the company’s shipping operations, which are driven by the industry’s demand for crude-oil and product tankers. Other factors beyond the company’s control include the general level of inflation and energy costs to operate the company’s refinery and distribution network.

     The company’s most significant marketing areas are the West Coast of North America, the U.S. Gulf Coast, Latin America, Asia, southern Africa and the United Kingdom. Chevron operates or has significant ownership interests in refineries in each of these areas except Latin America. The company completed sales of marketing businesses during 2009 in certain countries in Latin America and Africa. The company plans to discontinue, by mid-2010, sales of Chevron- and Texaco-branded motor fuels in the mid-Atlantic and other eastern states, where the company sold to retail customers through approximately 1,100 stations and to commercial and industrial customers through supply arrangements. Sales in these markets represent approximately 8 percent of the company’s total U.S. retail fuel sales volumes. Additionally, in January 2010, the company sold the rights to the Gulf trademark in the United States and its territories that it had previously licensed for use in the U.S. Northeast and Puerto Rico.

     The company’s refining and marketing margins in 2009 were generally weak due to challenging industry conditions, including a sharp drop in global demand reflecting the economic slowdown, excess refined-product supplies and surplus refining capacity. Given these conditions, in January 2010 the company announced to its employees that high-level evaluations of Chevron’s refining and marketing organizations had been completed. These evaluations concluded that the company’s downstream organization should be restructured to improve operating efficiency and achieve sustained improvement in financial performance. Details of the restructuring will be further developed over the next three to six months and may include exits from additional markets, dispositions of assets, reductions in the number of employees and other actions, which may result in gains or losses in future periods.

     Refer to the “Results of Operations” section on pages FS-7 and FS-8 for additional discussion of the company’s downstream operations.

     Chemicals Earnings in the petrochemicals business are closely tied to global chemical demand, industry inventory levels and plant