This document describes the methodology used by the Producer Worth Index (PPI) to calculate petroleum price indexes. The first part examines industry based PPI petroleum data, the second part discusses commodity and stage of processing based mostly PPI petroleum information, and the final part offers various sources for petroleum worth data.
Industry Primarily based Indexes
Establishments within the petroleum refining industry, North American Business Classification System (NAICS) code 324110, are primarily concerned in refining crude petroleum utilizing a number of of the next activities: (1) fractionation; (2) straight distillation of crude oil; and (3) cracking. Examples of main products of this trade are proven in the listing beneath.
– Aliphatic chemicals
– Asphalt paving mixtures
– Aviation fuels
– Cyclic aromatic hydrocarbons
– Diesel fuels
– Heating oils
– Hydraulic fluids
– Jet fuels
– Lubricating oils and greases
– Naphthenic acids
– Paraffin waxes
– Petroleum coke
– Petroleum jelly
– Petroleum lubricating oils
– Propane gases
A Producer Price Index (PPI) for an business measures price modifications received by home institutions for the industrys output offered outside the business. PPIs mirror the value developments of a constant set of goods that together characterize the entire output of an business.
When an institution is asked to take part within the PPI survey, it’s visited by a Bureau of Labor Statistics (BLS) economist who solicits the agency’s voluntary cooperation and informs the firm of the strict confidentiality rules that will safeguard the information being requested. Any specific product selected from a cooperating institution has a chance of choice proportional to its share of the establishment’s revenue.
From this point ahead, the establishment reviews prices for the chosen products, normally on a monthly basis, on a kind supplied by the BLS. Institutions are requested to report their costs as of Tuesday of the week containing the thirteenth of the month. If the institution fails to report or reviews incomplete data, it is called by a BLS economist who requests the wanted information. Most institutions report costs by the mail; nonetheless, reporting via fax is an obtainable different. Institutions continue to report till a brand new sample is selectedafter 7 years, on average, for an industry.
The statistical accuracy of the PPI depends heavily on the quality of the information offered by respondents. BLS emphasizes to cooperating businesses the necessity for experiences of reasonable transaction prices, together with all discounts, premiums, rebates, allowances, and so forth, moderately than listing or ebook prices. The dominant kind of value reported to BLS by the petroleum refining industry is an average worth, though web transaction costs additionally are reported. Reductions are captured in over eighty percent of the sampled costs, and contractual agreements cover costs in over half of the info collected. The most typical freight phrases in this trade are FOB terminal, although FOB factory is pretty common.
The worth indexes ensuing from this data collection activity often are issued within the second or third week of the month following the reference month. The specific monthly dates for every year are announced prior to the start of every calendar 12 months. All PPIs can be found at eight:30 a.m. eastern time on the scheduled launch day. Knowledge may be obtained over the Web, by way of a subscription, or by contacting the PPI program employees. The table below reveals the product detail for the petroleum refining industry at present accessible to information users. Most of those series have been printed for at the least the previous two many years.
* These relative significance figures are effective for January 2005. The elements do not add to 100.0 p.c because some objects do not meet publication standards.
All PPIs are routinely topic to revision four months after unique publication to replicate late experiences and corrections by company respondents. When PPIs are first launched, they are usually based on a substantial portion of the total variety of returns that finally will be received from respondents; hence, subsequent revisions are normally minor, especially on the extra highly aggregated grouping ranges. The table below compares the preliminary and last % adjustments for the petroleum refining industry index and two product indexes in 2003 and 2004.
Commodity Primarily based Indexes and the Stage of Processing System
In addition to trade indexes, PPI presents indexes organized by a commodity classification system.
This commodity classification structure organizes merchandise by similarity of finish use or materials composition, no matter whether the merchandise are categorised as main or secondary of their industry of origin. This system is exclusive to the PPI and doesn’t match any other normal coding structure, such because the NAICS or the U.N. Standard International Commerce Classification (SITC). All commodity based mostly PPI indexes are derived from corresponding business-categorized product indexes. Detailed commodities are classified within fifteen major 2-digit commodity groupings, with petroleum associated products categorized in commodity grouping 05, fuels and associated merchandise and energy.
Commodity indexes kind the premise for the stage of processing (SOP) system. SOP indexes are derived by regrouping commodities according to the category of buyer and the amount of bodily processing or assembling the merchandise have undergone. The three important PPI SOP classes are completed items, intermediate items, and crude goods. Completed items are outlined as commodities which are prepared on the market to the final-demand usereither an individual shopper or a enterprise firm. The category of intermediate materials, provides, and elements consists partly of already processed commodities that nonetheless require additional processing. The intermediate goods category also encompasses nondurable, bodily full items bought by enterprise firms as inputs for their operations. Crude supplies for further processing are outlined as unprocessed commodities not offered on to shoppers.
Power goods within the PPI for completed goods embody those types of energy to be offered to householdsprimarily gasoline, residence heating oil, residential fuel, and residential electricity. The desk under displays the relative significance values to the completed items index of all energy commodities included within the finished goods index as of December 2004. The table signifies that the PPI for gasoline (wpu0571) includes 3.7 % of the completed goods index.
Different Vitality Value Knowledge Sources
The Oil Day by day, Oil Price Info Service (OPIS), the Power Data Administration (EIA), and different BLS value packages all present price information for the refined petroleum trade. Reuters also publishes day by day value quotes.
The Oil Day by day was based in 1951 and covers all facets of the crude oil, pure gas, and refined petroleum industries. Experiences include news about particular corporations, the pricing of commodities, government coverage, energy related authorized circumstances, environmental and antitrust regulations, and worldwide vitality news. In cooperation with Reuters, the Oil Every day collects spot prices every day for regular and premium standard gasoline, regular reformulated gasoline, number two heating oil, diesel fuel, jet gas, and residual fuel. It additionally publishes Nymex futures costs for gasoline and heating oil. These spot costs are for the Gulf coast, New York Metropolis, and Los Angeles areas.
OPIS supplies its readers with price info for refined petroleum products, each on a national and regional foundation. OPIS publishes weekly common prices for gasoline and heating oil. These prices are divided into contract or spot prices. OPIS supplies spot costs for a wide array of petroleum products, together with heating oil, diesel fuel, unleaded, mid-premium, and premium gasoline, reformulated gasoline and jet gasoline for localities that include: New York harbor, Gulf coast, Chicago, Los Angeles, San Francisco, and the Pacific Northwest. OPIS is printed every Monday with the prices from the previous Thursday. OPIS additionally has daily (each Thursday) web online prices out there for gasoline and distillates sold at most of the terminals around the nation. These on-line costs are for a selected producer, a specific grade, a particular type (similar to oxygenated) and whether or not it is branded or unbranded.
The EIA is a part of the U.S. Division of Vitality and it collects in depth details about costs, provide, and demand for many energy commodities. It additionally publishes a steady stream of papers on the technical and financial points of vitality. The EIA publishes monthly common spot costs, and day by day spot costs for all of the foremost petroleum product traces: typical and reformulated gasoline, heating oil, diesel gas, jet fuel and residual oil. Daily spot prices are only collected at New York harbor, Gulf coast, and Los Angeles. Nationwide wholesale prices can be found with a one-month lag. Though these alternative power value sources generally might appear to show totally different gasoline worth movements from the PPI, typically those obvious variations are as a consequence of timing. For instance, as famous above EIA spot value data reflects each day costs, whereas PPI data reflect costs on a particular day of the reference month and are released the next month. BLS analysis has constantly proven that when timing variations are taken into account, the PPI and EIA sequence are extraordinarily comparable of their movements. The chart under compares the PPI for gasoline to the EIA measure of cents-per-gallon of whole gasoline for all areas and grades. For comparison functions, the PPI was rebased to 88.5 (the identical stage as the EIA information) in January 1983.
Other BLS packages with petroleum product prices embrace the consumer Value Index (CPI), which calculates indexes for retail gasoline prices. CPIs and PPIs for gasoline differ as a result of CPIs monitor the average change in the value paid by urban shoppers for gasoline, whereas PPIs observe the average change over time in selling prices received by domestic refineries. As result of this methodological distinction, solely CPIs seize taxes on gasoline paid by consumers. For extra info on CPIs for gasoline see www.bls.gov/cpi/cpigasfac.htm.
Additional Info: Extra info on the Producer Price Index can be discovered within the BLS Handbook of Strategies, chapter 14, “Producer Prices”, Bulletin 2490. Further assitance is on the market upon request by contacting the Section of Index Analysis and Public Info at (202) 691-7705 or email@example.com.