Producer Price Indexes

Producer Price Indexes for Petroleum Refining

This document describes the methodology used by the Producer Price Index (PPI) to calculate petroleum price indexes. The first section examines industry based PPI petroleum data, the second section discusses commodity and stage of processing based PPI petroleum data, and the final section provides alternative resources for petroleum price data.

Industry Based Indexes

Establishments in the petroleum refining industry, North American Industry Classification System (NAICS) code 324110, are primarily involved in refining crude petroleum using one or more of the following activities: (1) fractionation; (2) straight distillation of crude oil; and (3) cracking. Examples of primary products of this industry are shown in the list below.

  • Aliphatic chemicals
  • Asphalt paving mixtures
  • Aviation fuels
  • Benzene
  • Butylene
  • Cumene
  • Cyclic aromatic hydrocarbons
  • Diesel fuels
  • Ethylene
  • Gasoline
  • Heating oils
  • Hydraulic fluids
  • Jet fuels
  • Kerosene
  • Lubricating oils and greases
  • Naptha
  • Naphthenic acids
  • Paraffin waxes
  • Petrochemicals
  • Petroleum coke
  • Petroleum jelly
  • Petroleum lubricating oils
  • Propane gases
  • Propylene
  • Solvents
  • Styrene
  • Tar
  • Toluene
  • Xylene

A Producer Price Index (PPI) for an industry measures price changes received by domestic establishments for the industry’s output sold outside the industry. PPIs reflect the price trends of a constant set of goods that together represent the total output of an industry.

When an establishment is asked to participate in the PPI survey, it is visited by a Bureau of Labor Statistics (BLS) economist who solicits the firm'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 establishment has a likelihood of selection proportional to its share of the establishment's revenue.

From this point forward, the establishment reports prices for the selected products, usually on a monthly basis, on a form provided by the BLS. Establishments are asked to report their prices as of Tuesday of the week containing the 13th of the month. If the establishment fails to report or reports incomplete information, it is called by a BLS economist who requests the needed information. Most establishments report prices through the mail; however, reporting via fax is an available alternative. Establishments continue to report until a new sample is selected—after 7 years, on average, for an industry.

The statistical accuracy of the PPI depends heavily on the quality of the information provided by respondents. BLS emphasizes to cooperating businesses the need for reports of realistic transaction prices, including all discounts, premiums, rebates, allowances, and so forth, rather than list or book prices. The dominant type of price reported to BLS by the petroleum refining industry is an average price, though net transaction prices also are reported. Discounts are captured in over eighty percent of the sampled prices, and contractual agreements cover prices in over half of the data collected. The most common freight terms in this industry are FOB terminal, although FOB factory is fairly common.

The price indexes resulting from this data collection activity usually are issued in the second or third week of the month following the reference month. The specific monthly dates for each year are announced prior to the beginning of each calendar year. All PPIs are available at 8:30 a.m. eastern time on the scheduled release day. Data may be obtained over the Internet, through a subscription, or by contacting the PPI program staff. The table below shows the product detail for the petroleum refining industry currently available to data users. Most of these series have been published for at least the past two decades.

Index Code Title Relative Importance*
324110324110 Petroleum refineries 100.0
324110324110P Primary products 100.0
324110324110A Liquefied refinery gases, including other aliphatics (feed stock and other uses) 5.9
3241103241101 Gasoline, including finished base stocks and blending agents 50.6
32411032411013 Motor gasoline, including finished base stocks and blending agents 50.5
324110324110134 Regular gasoline 36.2
324110324110135 Mid-premium gasoline 5.4
324110324110136 Premium gasoline 8.9
3241103241102 Jet fuel 8.6
3241103241103 Kerosene, except jet fuel 0.7
3241103241104 Light fuel oils 22.5
324110324110411 Home heating oil and other distillates, not elsewhere classified 4.1
324110324110413 Diesel fuel 18.3
3241103241105 Heavy fuel oils, including No. 5, No. 6, heavy diesel, gas enrichment oils, etc. 2.6
3241103241109 Asphalt 1.4

* These relative importance figures are effective for January 2005. The components do not add to 100.0 percent because some items do not meet publication standards.

All PPIs are routinely subject to revision 4 months after original publication to reflect late reports and corrections by company respondents. When PPIs are first released, they are typically based on a substantial portion of the total number of returns that eventually will be received from respondents; hence, subsequent revisions are normally minor, especially at the more highly aggregated grouping levels. The table below compares the preliminary and final percent changes for the petroleum refining industry index and two product indexes in 2003 and 2004.

Year Month Petroleum refineries Motor gasoline Diesel fuel
Preliminary Final Preliminary Final Preliminary Final
2003 January 15.2 15.4 15.7 16.7 13.6 12.3
February 20.5 20.2 19.0 17.9 25.7 26.9
March 6.0 6.1 6.8 6.8 4.2 4.5
April -20.3 -20.4 -16.8 -16.9 -20.9 -20.9
May -7.4 -7.1 -6.1 -5.6 -14.4 -14.1
June 4.5 4.9 5.5 5.2 2.6 2.2
July 2.6 2.2 1.6 2.0 3.2 3.3
August 5.6 5.4 5.2 4.9 4.1 4.1
September -1.7 -1.7 3.3 3.3 -5.6 -5.6
October -0.8 -1.1 -6.2 -6.6 11.0 11.0
November -4.9 -4.9 -8.0 -7.3 -5.2 -5.2
December 1.6 1.9 -0.7 -1.0 2.1 2.3
2004 January 13.1 13.3 14.7 14.8 11.7 11.4
February -0.5 -0.8 2.8 2.7 -5.0 -5.0
March 3.1 3.1 5.2 5.2 5.7 5.7
April 5.8 6.2 7.4 8.0 9.3 9.3
May 8.2 7.7 11.9 11.3 1.0 0.9
June -6.0 -5.7 -8.1 -8.1 -5.7 -5.5
July 6.1 6.1 4.7 5.4 7.9 7.7
August 2.5 2.3 -5.2 -5.8 9.5 9.8

Commodity Based Indexes and the Stage of Processing System

In addition to industry indexes, PPI presents indexes organized by a commodity classification system.

This commodity classification structure organizes products by similarity of end use or material composition, regardless of whether the products are classified as primary or secondary in their industry of origin. This system is unique to the PPI and does not match any other standard coding structure, such as the NAICS or the U.N. Standard International Trade Classification (SITC). All commodity based PPI indexes are derived from corresponding industry-classified product indexes. Detailed commodities are classified within fifteen major 2-digit commodity groupings, with petroleum related products classified in commodity grouping 05, fuels and related products and power.

Commodity indexes form the basis for the stage of processing (SOP) system. SOP indexes are derived by regrouping commodities according to the class of buyer and the amount of physical processing or assembling the products have undergone. The three main PPI SOP categories are finished goods, intermediate goods, and crude goods. Finished goods are defined as commodities that are ready for sale to the final-demand user—either an individual consumer or a business firm. The category of intermediate materials, supplies, and components consists partly of already processed commodities that still require further processing. The intermediate goods category also encompasses nondurable, physically complete goods purchased by business firms as inputs for their operations. Crude materials for further processing are defined as unprocessed commodities not sold directly to consumers.

Energy goods within the PPI for finished goods include those types of energy to be sold to households—primarily gasoline, home heating oil, residential gas, and residential electricity. The table below displays the relative importance values to the finished goods index of all energy commodities included in the finished goods index as of December 2004. The table indicates that the PPI for gasoline (wpu0571) comprises 3.7 percent of the finished goods index.

Index Code Title Relative Importance to Finished Goods
05 Fuels and related products and power 17.084
051 Coal 0.000
0511 Anthracite 0.000
051101 Prepared anthracite shipped 0.000
053 Gas fuels 0.685
0532 Liquefied petroleum gas 0.685
054 Electric power 6.976
0541 Residential electric power 6.976
055 Utility natural gas 4.462
0551 Residential natural gas 4.462
057 Petroleum products, refined 4.837
0571 Gasoline 3.700
057103 Unleaded premium gasoline 0.661
057104 Unleaded regular gasoline 2.612
057105 Unleaded mid-premium gasoline 0.404
057106 Aviation gasoline 0.023
0572 Kerosene and jet fuels 0.058
057202 Kerosene 0.058
0573 Light fuel oils 0.911
057302 Home heating oil and other distillates 0.714
057303 #2 diesel fuel 0.197
0576 Finished lubricants 0.168
057603 Lubricating grease 0.012
057604 Lubricating and similar oils 0.156
058 Petroleum and coal products, n.e.c. 0.124

Alternative Energy Price Data Sources

The Oil Daily, Oil Price Information Service (OPIS), the Energy Information Administration (EIA), and other BLS price programs all provide price data for the refined petroleum industry. Reuters also publishes daily price quotes.

The Oil Daily was founded in 1951 and covers all aspects of the crude oil, natural gas, and refined petroleum industries. Reports include news about specific companies, the pricing of commodities, government policy, energy related legal cases, environmental and antitrust regulations, and international energy news. In cooperation with Reuters, the Oil Daily collects spot prices on a daily basis for regular and premium conventional gasoline, regular reformulated gasoline, number two heating oil, diesel fuel, jet fuel, and residual fuel. It also publishes Nymex futures prices for gasoline and heating oil. These spot prices are for the Gulf coast, New York City, and Los Angeles regions.

OPIS provides its readers with price information for refined petroleum products, both on a national and regional basis. OPIS publishes weekly average prices for gasoline and heating oil. These prices are divided into contract or spot prices. OPIS provides spot prices for a wide array of petroleum products, including heating oil, diesel fuel, unleaded, mid-premium, and premium gasoline, reformulated gasoline and jet fuel for localities that include: New York harbor, Gulf coast, Chicago, Los Angeles, San Francisco, and the Pacific Northwest. OPIS is published every Monday with the prices from the previous Thursday. OPIS also has daily (every Thursday) internet online prices available for gasoline and distillates sold at most of the terminals around the country. These online prices are for a specific producer, a specific grade, a specific type (such as oxygenated) and whether it is branded or unbranded.

The EIA is part of the U.S. Department of Energy and it collects extensive information about prices, supply, and demand for most energy commodities. It also publishes a steady stream of papers on the technical and economic aspects of energy. The EIA publishes monthly average spot prices, and daily spot prices for all of the major petroleum product lines: conventional and reformulated gasoline, heating oil, diesel fuel, jet fuel and residual oil. Daily spot prices are only collected at New York harbor, Gulf coast, and Los Angeles. Nationwide wholesale prices are available with a one-month lag. Although these alternative energy price sources sometimes may appear to show different fuel price movements from the PPI, often those apparent differences are due to timing. For example, as noted above EIA spot price data reflects daily prices, whereas PPI data reflect prices on a specific day of the reference month and are released the following month. BLS research has consistently shown that when timing differences are taken into account, the PPI and EIA series are extremely similar in their movements. The chart below compares the PPI for gasoline to the EIA measure of cents-per-gallon of total gasoline for all regions and grades. For comparison purposes, the PPI was rebased to 88.5 (the same level as the EIA data) in January 1983.

Other BLS programs with petroleum product prices include the Consumer Price Index (CPI), which calculates indexes for retail gasoline prices. CPIs and PPIs for gasoline differ because CPIs track the average change in the price paid by urban consumers for gasoline, whereas PPIs track the average change over time in selling prices received by domestic refineries. As result of this methodological difference, only CPIs capture taxes on gasoline paid by consumers. For more information on CPIs for gasoline see www.bls.gov/cpi/cpigasfac.htm.

Additional Information: Additional information on the Producer Price Index can be found in the BLS Handbook of Methods, chapter 14, "Producer Prices", Bulletin 2490. Further assitance is available upon request by contacting the Section of Index Analysis and Public Information at (202) 691-7705 or ppi-info@bls.gov.

Last Modified Date: March 31, 2011

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