Approximately $400 million of the increase was related to larger benefits in 2004 from

corporate-level tax adjustments. Higher charges in 2005 also were associated with environmental remediation of properties that had been sold or idled and Unocal corporate-level activities. Interest expense was higher in 2005 due to an increase in interest rates and the debt assumed with the Unocal acquisition.

CONSOLIDATED STATEMENT OF INCOME

Comparative amounts for certain income statement categories are shown below:

     Sales and other operating revenues in 2006 increased over 2005 due primarily to higher prices for refined products. The increase in 2005 from 2004 was a result of the same factor plus the effect of higher average prices for crude oil and natural gas. The higher revenues in 2006 were net of an impact from the change in the accounting for buy/sell contracts, as described in Note 14 on page FS-43.

     Increased income from equity affiliates in 2006 was mainly due to improved results for Tengizchevroil (TCO) and CPChem. The improvement in 2005 from 2004 was primarily due to improved results for TCO and Hamaca (Venezuela). Refer to Note 12, beginning on page FS-41, for a discussion of Chevron’s investment in affiliated companies.

     Other income of nearly $1.9 billion in 2004 included approximately $1.3 billion of gains from upstream property sales. Interest income contributed $600 million, $400 million and $200 million in 2006, 2005 and 2004, respectively. Average interest rates and balances of cash and marketable securities increased each year. Foreign currency losses were $260 million in 2006 and $60 million in both 2005 and 2004.

     Crude oil and product purchases in 2006 increased from 2005 on higher prices for crude oil and refined products and the inclusion of Unocal-related amounts for a full year in 2006. The increase was mitigated by the effect of the accounting change in April 2006 for buy/sell contracts. Purchase costs increased 35 percent in 2005 from the prior year as a result of higher prices for crude oil, natural gas and refined products, as well as to the inclusion of Unocal-related amounts for five months.

Operating, selling, general and administrative expenses in 2006 increased 16 percent from a year earlier. Expenses associated with the former Unocal operations are included for the full year in 2006, vs. five months in 2005. Besides this effect, expenses were higher in 2006 for labor, transportation, uninsured costs associated with the hurricanes in 2005 and a number of corporate items that individually were not significant. Total expenses increased in 2005 from 2004 due mainly to the inclusion of former-Unocal expenses for five months, higher costs for labor and transportation, uninsured costs associated with storms in the Gulf of Mexico, and asset write-offs.

     Exploration expenses in 2006 increased from 2005 mainly due to higher amounts for well write-offs and geological and geophysical costs for operations outside the United States, as well as the inclusion of expenses for the former Unocal operations for a full year in 2006. Expenses increased in 2005 from 2004 due mainly to the inclusion of