by approximately $33 million and reduce the fair value of the crude oil sale derivative contracts by about $11 million. The same hypothetical decrease in the prices of these commodities would result in the same opposite effects on the fair values of the contracts.

     The hypothetical effect on these contracts was estimated by calculating the cash value of the contracts as the difference between the hypothetical and contract delivery prices multiplied by the contract amounts.

     Foreign Currency The company enters into forward exchange contracts, generally with terms of 180 days or less, to manage some of its foreign currency exposures. These exposures 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 2005 would be a reduction in the fair value of the foreign exchange contracts of approximately $70 million. The effect would be the opposite for a hypothetical 10 percent decrease in the year-end value of the U.S. dollar.

     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, whereas interest rate swaps relating to a portion of the company’s floating-rate debt are recorded at fair value on the balance sheet with resulting gains and losses reflected in income.

     At year-end 2005, the weighted average maturity of “receive fixed” interest rate swaps was approximately 2 years. There were no “receive floating” swaps outstanding at year end. A hypothetical increase of 10 basis points in fixed interest rates would reduce the fair value of the “receive fixed” swaps by approximately $3 million.

     For the financial and derivative instruments discussed above, there was not a material change in market risk between 2005 and 2004.

     The hypothetical variances used in this section were selected for illustrative purposes only and do not represent the company’s estimation of market changes. The actual impact of future market changes could differ materially due to factors discussed elsewhere in this report, including those set forth under the heading “Risk Factors” in Part I, Item 1A of the company’s 2005 Annual Report on Form 10-K.

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-17 for further discussion. Management believes the