Price and Expenditure Measures of Petroleum Products: A Comparison: Price Changes in Petroleum Products Are Closely Correlated among the Three Price Programs of the Bureau of Labor Statistics; Changes in the BLS Petroleum-Product CPI Also Correlate with Changes in Consumer Spending on Those Products, as Measured by the Consumer Expenditure Survey

Article excerpt

Political events in oil-producing countries, hurricanes in the Gulf of Mexico, and increasing global demand for petroleum products have all contributed to sharp increases in recent years in prices of crude oil and of petroleum products derived from crude oil. From January 2000 to July 2006, the average price for a gallon of unleaded regular gasoline in the United States increased 130.5 percent. (1) Personal consumption expenditures on gasoline rose from $175.7 billion to $287.3 billion from 2000 to 2005. (2) Rising prices and increasing expenditures are a concern for consumers, business leaders, and Federal policymakers. As a result, reliable information on the prices and costs of crude oil and petroleum products is more vital than ever in making decisions at all levels of the economy.

The Bureau of Labor Statistics (BLS, the Bureau) conducts price and consumer expenditure surveys that measure both changes in prices of, and expenditures for, petroleum products throughout the various levels of the economy. This article introduces the programs that carry out these surveys, describes the petroleum data compiled by those programs, explains the methodology underlying the various crude-oil and gasoline surveys, and provides historical comparisons of price data across the BLS programs.

Price and expenditure programs

The Bureau conducts three price surveys and a survey of consumer expenditures: the International Price Program (IPP), which measures import and export prices; the Producer Price Index (PPI), which measures prices received by domestic producers; the Consumer Price Index (CPI), which measures consumer prices paid out of pocket; and the Consumer Expenditure Survey (CE), which measures out-of-pocket consumer expenditures. Chart 1 illustrates the high correlation among the three price indexes. (Two different PPI's are shown.) Each program has a different scope, measurement goal, and methodology for collecting and compiling data related to crude oil and petroleum products, and the differences among the programs must be understood in order to properly interpret and compare the movements among the respective indexes. A description of each program's measures of petroleum product prices and expenditures follows. The appendix presents an exhibit summarizing the program methodologies.

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Measurement of traded-goods inflation: the IPP's import and export price indexes. The IPP produces indexes for import and export goods and services. These indexes measure price changes on the basis of the actual transaction prices of specifically defined items and services coming into and leaving the country. Published IPP indexes for crude oil and refined petroleum products reflect three classification systems: the Harmonized Tariff System of the United States, the Bureau of Economic Analysis End Use classification system, and the North American Industrial Classification System (NAICS.) These indexes are used. among other things, to deflate various foreign trade statistics produced by the U.S. Census Bureau and the Bureau of Economic Analysis.

Although the me calculates indexes for all petroleum products, only some of these products meet the program's dollar-value-of-trade threshold for public release. The IPP publishes indexes solely for products with an annual dollar value of trade for exports of at least $3.0 billion or a dollar value of trade for imports of at least $3.0 billion. Because U.S. crude-oil exports no longer exceed $3.0 billion per year, the IPP does not publish export indexes for crude oil. By contrast, crude-oil imports have a trade dollar value that greatly exceeds the IPP threshold. Indeed, on the basis of a dollar value of more than $131 billion in 2004, imported crude oil accounts for 9.35 percent of the overall IPP import index, with all other imported petroleum products together accounting for 3.45 percent of the weight of the import index. Among the import and export price indexes the IPP produces for other petroleum products are indexes for gasoline and distillates. …