2006 earnings from 2005 was primarily associated with higher average refined-product margins in 2006 and the adverse effect of downtime in 2005 at refining, marketing and pipeline operations that was caused by hurricanes in the Gulf of Mexico.

     Sales volumes of refined products were 1.46 million barrels per day in 2007, a decrease of 3 percent and 1 percent from 2006 and 2005, respectively. The reported sales volume for 2007 was on a different basis than 2006 and 2005 due to a change in accounting rules that became effective April 1, 2006, for certain purchase and sale (buy/sell) contracts with the same counterparty. Excluding the impact of this accounting standard, refined-product sales in 2007 decreased 1 percent from 2006 and increased about 5 percent from 2005. Branded gasoline sales volumes of 629,000 barrels per day in 2007 increased about 2 percent from 2006 and 6 percent from 2005, largely due to growth of the Texaco brand.

     Refer to the “Selected Operating Data” table on page FS-l0 for a three-year comparative of sales volumes of gasoline and other refined products and refinery-input volumes. Refer also to Note 13, “Accounting for Buy/Sell Contracts,” on page FS-42 for a discussion of the accounting for purchase and sale contracts with the same counterparty.

International Downstream – Refining, Marketing and Transportation

     International downstream income of $2.5 billion in 2007 increased about $500 million from 2006 and $750 million from 2005. Results for 2007 included gains of approximately $1 billion on the sale of assets, including an interest in a refinery and marketingassets in the Benelux region of Europe. Margins on the sale of refined products in 2007 were up slightly from the prior year. Operating expenses were higher, and earnings from the company’s shipping operations were lower. The increase in earnings in 2006 compared with 2005 was associated mainly with the benefit of higher refined-product sales margins in the Asia-Pacific area and Canada and improved results from crude-oil and refined-product trading activities.

     Refined-product sales volumes were 2.03 million barrels per day in 2007, about 5 percent and 10 percent lower than 2006 and 2005, respectively, due largely to the impact of asset sales and the accounting-standard change for buy/sell contracts. Excluding the accounting change, sales decreased about 4 percent and 5 percent from 2006 and 2005, respectively.

     Refer to the “Selected Operating Data” table on page FS-10 for a three-year comparative of sales volumes of gasoline and other refined products and refinery-input volumes. Refer also to Note 13, “Accounting for Buy/Sell Contracts,” on page FS-42 for a discussion of the accounting for purchase and sale contracts with the same counterparty.

Chemicals

     The chemicals segment includes the company’s Oronite subsidiary and the 50 percent-owned Chevron Phillips ChemicalCompany LLC (CPChem). In 2007, earnings were $396 million, compared with $539 million and $298 million in 2006 and 2005, respectively. Between 2006 and 2007, the benefit of improved margins on sales of lubricants and fuel additives by Oronite was more than offset by