assets or operations complementary to its asset base to help augment the company’s growth. Asset sales during 2007 included the company’s 31 percent ownership interest in a refinery and related assets in the Netherlands; fuels marketing businesses in Belgium, Luxembourg, the Netherlands and Uruguay; and the investment in common stock of Dynegy Inc. Other asset dispositions and restructurings may occur in future periods and could result in significant gains or losses.

     Comments related to earnings trends for the company’s major business areas are as follows:

Upstream   Earnings for the upstream segment are closely aligned with industry price levels for crude oil and natural gas. Crude oil and natural gas prices are subject to external factors over which the company has no control, including product demand connected with global economic conditions, industry inventory levels, production quotas imposed by the Organization of Petroleum Exporting Countries (OPEC), weather-related damage and disruptions, competing fuel prices, and regional supply interruptions or fears thereof that may be caused by military conflicts, civil unrest or political uncertainty. Moreover, any of these factors could also inhibit the company’s production capacity in an affected region. The company monitors developments closely in the countries in which it operates and holds investments, and attempts to manage risks in operating its facilities and business.

     Price levels for capital and exploratory costs and operating expenses associated with the efficient production of crude oil and natural gas can also be subject to external factors beyond the company’s control. External factors include not only the general level of inflation but also prices charged by the industry’s material- and service-providers, which can be affected by the volatility of the industry’s own supply and demand conditions for such materials and services. The oil and gas industry worldwide has experienced significant price increases for these items since 2005, and future price increases may continue to exceed the general level of inflation. Capital and exploratory expenditures and operating expenses also can be affected by damages to production facilities caused by severe weather or civil unrest.

     Industry price levels for crude oil increased during 2007. The spot price for West Texas Intermediate (WTI) crude oil, a benchmark crude oil, averaged $72 per barrel in 2007, up approximately $6 per barrel from the 2006 average price. The rise in crude oil prices was attributed primarily to increasing demand in growing economies, the heightened level of geopolitical uncertainty in some areas of the world and supply concerns in other key producing regions. As of mid-February 2008, the WTI price was about $93 per barrel.

     As in 2006, a wide differential in prices existed in 2007 between high-quality (i.e., high-gravity, low sulfur) crude oils and those of lower quality (i.e., low-gravity, heavier types of crude). The price for the heavier crudes has been dampened because of ample supply and lower relative demand due to the limited number of refineries that are able to process this lower-quality