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 Unocal-related amounts for five months.

     Depreciation, depletion and amortization expenses increased from 2004 through 2006 mainly as a result 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.

     Interest and debt expense in 2006 decreased from 2005 primarily due to lower average debt balances and an increase in the amount of interest capitalized, partially offset by higher average interest rates on commercial paper and other variable-rate debt. The increase in 2005 over 2004 was mainly due to the inclusion of debt assumed with the Unocal acquisition and higher average interest rates for commercial paper borrowings.

     Taxes other than on income were essentially unchanged in 2006 from 2005, with the effect of higher U.S. refined product sales being offset by lower sales volumes subject to duties in the company’s European downstream operations.

The increase in 2005 from 2004 was the 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.

     Effective income tax rates were 46 percent in 2006, 44 percent in 2005 and 37 percent in 2004. The higher tax rate in 2006 included the effect of one-time charges totaling $400 million, including an increase in tax rates on upstream operations in the U.K. North Sea and settlement of a tax claim in Venezuela. Rates were higher in 2005 compared with the prior year due to an increase in earnings in countries with higher tax rates and the absence of benefits in 2004 from changes in the income tax laws for certain international operations. Refer also to the discussion of income taxes in Note 16 beginning on page FS-44.

INFORMATION RELATED TO INVESTMENT IN

DYNEGY INC.

At year-end 2006, Chevron owned a 19 percent equity interest in the common stock of Dynegy Inc., a provider of electricity to markets and customers throughout the United States.

     Investment in Dynegy Common Stock   At December 31, 2006, the carrying value of the company’s investment in Dynegy common stock was approximately $250 million. This amount was about $180 million below the company’s proportionate interest in Dynegy’s underlying net assets. This difference is primarily the result of write-downs of the investment in 2002 for declines in the market value of the common shares below the company’s carrying value that were deemed to be other than temporary. The difference had been assigned to the extent practicable to specific Dynegy assets and liabilities, based upon the company’s analysis of the various factors associated with the decline in value of the Dynegy shares. The company’s equity share of Dynegy’s reported earnings is adjusted quarterly when appropriate to recognize a portion of the difference