include revenue and anticipated purchase transactions, including foreign currency capital expenditures and lease commitments, forecasted to occur within 180 days. The forward exchange contracts are recorded at fair value on the balance sheet with resulting gains and losses reflected in income.

     The aggregate effect of a hypothetical 10 percent increase in the value of the U.S. dollar at year-end 2007 would be a reduction in the fair value of the foreign exchange contracts of approximately $75 million. The effect would be the opposite for a hypothetical 10 percent decrease in the value of the U.S. dollar at year-end 2007.

     Interest Rates  The company enters into interest rate swaps as part of its overall strategy to manage the interest rate risk on its debt. Under the terms of the swaps, net cash settlements are based on the difference between fixed-rate and floating-rate interest amounts calculated by reference to agreed notional principal amounts. Interest rate swaps related to a portion of the company’s fixed-rate debt are accounted for as fair value hedges. Interest rate swaps related to floating-rate debt are recorded at fair value on the balance sheet with resulting gains and losses reflected in income. At year-end 2007, the company had no interest-rate swaps on floating-rate debt. At year-end 2007, the weighted average maturity of “receive fixed” interest rate swaps was less than one year. A hypothetical increase or decrease of 10 basis points in fixed interest rates would have a de minimis impact on the fair value of the “receive fixed” swaps.

Transactions With Related Parties

Chevron enters into a number of business arrangements with related parties, principally its equity affiliates. These arrangements include long-term supply or offtake agreements. Long-term purchase agreements are in place with the company’s refining affiliate in Thailand. Refer to page FS-5 for further discussion. Management believes the foregoing agreements and others have been negotiated on terms consistent with those that would have been negotiated with an unrelated party.

Litigation and Other Contingencies

MTBE  Chevron and many other companies in the petroleum industry have used methyl tertiary butyl ether (MTBE) as a gasoline additive. The company is a party to 88 lawsuits and claims, the majority of which involve numerous other petroleum marketers and refiners, related to the use of MTBE in certain oxygenated gasolines and the alleged seepages of MTBE into groundwater. Chevron has agreed in principle to a tentative settlement of 60 pending lawsuits and claims. The terms of this agreement, which must be approved by a number of parties, including the court, are confidential and not material to the company’s results of operations, liquidity or financial position.

     Resolution of remaining lawsuits and claims may ultimately require the company to correct or ameliorate the alleged effects on the environment of prior release of MTBE by the company or other parties. Additional lawsuits and claims related to the use of MTBE, including personal-injury claims, may be filed in the future. The tentative settlement of the referenced 60 lawsuits did