and balances of cash and marketable securities. Foreign currency losses were $60 million in both 2005 and 2004 and about $200 million in 2003.

     Crude oil and product purchases in 2005 increased approximately 35 percent from 2004, due mainly to higher prices for crude oil, natural gas and refined products as well as to the inclusion in 2005 of Unocal-related amounts for five months. Crude oil and product purchase costs increased 32 percent in 2004 from the prior year as a result of higher prices and increased purchased volumes of crude oil and products.

     Operating, selling, general and administrative expenses in 2005 increased 18 percent from a year earlier. Higher amounts in 2005 included former-Unocal expenses for five months, and for heritage-Chevron operations, higher costs for labor and transportation, uninsured costs associated with storms in the Gulf of Mexico, asset write-offs, repair and maintenance services, fuel costs for plant operations and a number of corporate items that individually were not significant. Total expenses increased from 2003 to 2004 due mainly to costs for chartering crude oil tankers and other transportation expenses.

     Exploration expenses in 2005 increased mainly due to the inclusion of Unocal amounts for five months. In 2004, amounts were higher than in 2003 for international operations, primarily for seismic costs and expenses associated with evaluating the feasibility of different project alternatives.

Depreciation, depletion and amortization expenses in 2005 increased mainly as a result of five months of depreciation and depletion expense for the former Unocal assets and higher depreciation rates for certain heritage-Chevron crude oil and natural gas producing fields worldwide. Between 2003 and 2004, expenses did not change materially, after consideration of the effects of special-item charges for asset impairments in 2003.

     Interest and debt expense in 2005 increased mainly due to the inclusion of debt assumed with the Unocal acquisition and higher average interest rates for commercial paper borrowings. The decline between 2003 and 2004 reflected lower average debt balances.

     Taxes other than on income in 2005 increased as a result of higher international taxes assessed on product values, higher duty rates in the areas of the company’s European downstream operations and higher U.S. federal excise taxes on jet fuel resulting from a change in tax law that became effective in 2005. The increase in 2004 from 2003 primarily reflected the weakening U.S. dollar on foreign currency–denominated duties in the company’s European downstream operations.

     Effective income tax rates were 44 percent in 2005, 37 percent in 2004 and 43 percent in 2003, after excluding the effect of net special items. Rates were higher in 2005 compared with the prior year due to the absence of benefits in 2004 from changes in the income tax laws for certain international operations and an increase in earnings in countries with higher tax rates. As compared with the effective tax rate in 2003, the effective tax rate in 2004 benefited from changes in the income tax laws for certain international operations, a