Consumer Price Index

How BLS Measures Price Change for Motor Fuels in the Consumer Price Index

Introduction

The motor fuel index, a component of the private transportation index, is included in the transportation group of the Consumer Price Index (CPI). Together with the index for household fuels, it makes up the special energy index. The motor fuel index is published on a monthly basis for all areas for which CPI data are published.

Relative Importance

The individual items which comprise the motor fuel index, together with their relative importance values within the U.S. city average of the CPI for All Urban Consumers (CPI-U), as of December 2007 are as follows:

Table 1: Relative Importance of Selected Transportation components of the CPI for All Urban Consumers (CPI-U): U.S. city average, December 2004

Item

Relative Importance

Motor Fuel 5.482
Gasoline 5.215
Other Motor Fuels 0.268

The Gasoline (all types) index, which has the majority of the weight of the motor fuel index, is composed of three types of grades of gasoline.

High altitude areas of the country have gasoline octane ratings that may be different than the ranges given above.

The Other Motor Fuels index is composed of automotive diesel fuel and alternative automotive fuels.

Selection and identifying characteristics to be priced

Information from the Telephone Point-of-Purchase Survey (TPOPS) is used to select the outlets surveyed for the motor fuel index. Prices are collected for every grade of gasoline (provided each grade is available) at every outlet selected. The prices collected are classified as a per-gallon pricing unit and include all taxes, both excise and sales taxes. The monthly price change in the motor fuel index is determined by the price changes reported for selected items in the selected outlets. The current CPI outlet sample for gasoline (all grades) is approximately 1035 outlets.

CPI field staff must first determine the type of motor fuel priced by observing the motor fuel pump at the outlet. The following are characteristics that would be identified:

Notes on substitution and quality adjustments

Because motor fuels generally always are available, there are very few item substitutions caused by item availability. Additionally, octane level changes, provided they occur within a specified range, and outlet or brand name changes are examples of situations where there would be no need for item substitutions all other things being equal. A scenario that would precipitate the need for an item substitution would be a change in the level of service, full service versus self-service, available at the outlet.

There are no explicit quality adjustments made for changes in fuel or service quality. Adjustments are not made for switches in gasoline content due to mandated air quality requirements. 1

Table 2: Distribution of Observations

Item

Number of Observations

Gasoline (All Types) 3030
Other Motor Fuels 421

Other sources of information on motor fuel price changes

Although the CPI for Motor Fuel is reported monthly, there are numerous government agencies and independent associations that report motor fuel data using different time periods. In addition, sampling techniques and sampling methodology differ for the various groups reporting data. Three of the more well-known agencies reporting motor gasoline prices are:

Energy Information Administration (EIA) – a division of the Department of Energy that publishes retail gasoline prices weekly for all three grades of gasoline from a sample of approximately 800 retail gasoline outlets. The prices collected represent self-service except in areas having only full service. The sampling methodology used by EIA is as follows:

"The sample for the Motor Gasoline Price Survey was drawn from a frame of approximately 115,000 retail gasoline outlets. The gasoline outlet frame was constructed by combining information purchased from a private commercial source with information contained on existing EIA petroleum product frames and surveys. Outlet names and zip codes were obtained from the private commercial data source. Additional information was obtained directly from companies selling retail gasoline to supplement information on the frame. The individual frame outlets were mapped to counties using their zip codes. The outlets were then assigned to the published geographic areas as defined by the EPA program area, or for conventional gasoline areas, as defined by the Census Bureau’s Standard Metropolitan Statistical Areas (SMSA) by using their county assignment." 2

American Automobile Association (AAA) - an independent agency which publishes updated retail gasoline price data daily. Price data are derived from credit card transactions at over 60,000 gasoline stations throughout the country.

Lundberg Survey - an independent market research company offering local and national coverage of fuel prices and fuel taxes. Retail prices of gasoline and diesel fuel are gathered twice-monthly in 68 markets, covering all states and Washington, D.C., or on special request in other areas and frequencies.

Although these other sources may appear to show different fuel price movements from the CPI, the apparent differences are due to timing. For example, the EIA data are released each week and correspond to prices on a particular day. The CPI motor fuels index corresponds to average prices over a calendar month. BLS research has consistently shown that when timing differences are taken into account, the CPI and EIA are extremely similar in their movements.

Footnotes

(1) CPI Detailed Report, "Treatment of Mandated Pollution Control Measures in the CPI," (September 1998).

(2) Energy Information Association, "Sampling Methodology," available at http://www.eia.gov/oil_gas/petroleum/data_publications/wrgp/sampling_methodology.html (visited October 25, 2011).

Additional information

Additional information on the Consumer Price Index can be found in the BLS Handbook of Methods, chapter 17, "The Consumer Price Index,", available on the BLS Internet site (www.bls.gov/opub/hom/homch17.htm). For more information, call the Information and Analysis Section of the CPI at (202) 691-7000 or send e-mail.

Last Modified Date: October 26, 2011

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