agreement to a joint-stock company in October 2006. Refer to Note 12, beginning on page FS-41, for a discussion of Chevron’s investments in affiliated companies.

     Other income of $2.7 billion in 2008 included gains of approximately $1.3 billion on asset sales. Other income of $2.7 billion in 2007 included net gains of $1.7 billion from asset sales and a loss of $245 million on the early redemption of debt. Interest income was approximately $340 million in 2008 and $600 million in both 2007 and 2006. Foreign currency effects benefited other income by $355 million in 2008 while reducing other income by $352 million and $260 million in 2007 and 2006, respectively.

     Crude oil and product purchases in 2008 increased $38.1 billion from 2007 due to higher prices for crude oil, natural gas and refined products. Crude oil and product purchases in 2007 increased more than $5 billion from 2006 due to these same factors.

     Operating, selling, general and administrative expenses in 2008 increased approximately $3.7 billion from 2007 primarily due to $1.2 billion of higher costs for employee and contract labor; $800 million of increased costs for materials, services and equipment; $700 million of uninsured losses associated with hurricanes in the Gulf of Mexico in 2008; and an increase of about $300 million for environmental remediation activities. Total expenses were about $3.1 billion higher in 2007 than in 2006. Increases were recorded in a number of categories, including $1.5 billion of higher costs for employee and contract labor.

     Exploration expenses in 2008 declined from 2007 due mainly to lower amounts for well write-offs for operations in the United States. Expenses in 2007 were essentially unchanged from 2006.

     Depreciation, depletion and amortization expenses increased in 2008 from 2007 largely due to higher depreciation rates for certain crude oil and natural gas producing fields, reflecting completion of higher-cost development projects and asset-retirement obligations. The increase between 2006 and 2007 reflects an increase in charges related to asset write-downs and higher depreciation rates for certain crude oil and natural gas producing fields worldwide.

     Taxes other than on income decreased between 2007 and 2008 periods mainly due to lower import duties as a result of the effects of the 2007 sales of the company’s Benelux refining and marketing businesses and a decline in import volumes in the United Kingdom. Taxes other than on income increased between 2006 and 2007 due to higher import duties in the company’s U.K. downstream operations in 2007.

     Interest and debt expense decreased significantly in 2008 because all interest-related amounts were being capitalized. Interest and debt expense in 2007 decreased from 2006 primarily due to lower average debt balances and higher amounts of interest capitalized.

     Effective income tax rates were 44 percent in 2008, 42 percent in 2007 and 46 percent in 2006. Rates were higher between 2007 and 2008 primarily due to a greater proportion of income earned in tax jurisdictions with higher income tax rates. In addition, the 2007 period included a relatively low