How Timing and World Events Affect Price Statistics

Rising prices have certainly been in the news lately, and we have received a lot of questions about BLS price statistics. Some questions, however, are “evergreen.” Even in times of moderate price changes, BLS staff often hear that the Consumer Price Index (CPI) doesn’t reflect an individual’s experience. We address this concern and a wide range of other issues in our Questions and Answers about the CPI:

Q. Whose buying habits does the CPI reflect?

A. The CPI does not necessarily measure your own experience with price change. It is important to understand that BLS bases the market baskets and pricing procedures for the CPI-U and CPI-W populations on the experience of the relevant average household, not of any specific family or individual. For example, if you spend a larger-than-average share of your budget on medical expenses, and medical care costs are increasing more rapidly than the cost of other items in the CPI market basket, your personal rate of inflation may exceed the increase in the CPI. Conversely, if you heat your home with solar energy, and fuel prices are rising more rapidly than other items, you may experience less inflation than the general population does. A national average reflects millions of individual price experiences; it seldom mirrors a particular consumer’s experience.

Beyond the differences in individual spending habits, price statistics are affected by a variety of factors, including world events and the timing of price data collection. To explore these factors, we will look beyond the CPI to all BLS price indexes. We’ll focus on the price of oil and related items. Let’s start with a reminder of what is included in the BLS family of price indexes and look at how oil-related prices changed in March.

• The Consumer Price Index measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
  • The CPI for gasoline (all types) rose 18.3 percent in March and 48.0 percent over the last 12 months.
  • The CPI for energy rose 11.0 percent in March and 32.0 percent over the last 12 months.
• The Producer Price Index (PPI) measures the average change over time in the selling prices domestic producers receive for their output.
  • The PPI for crude petroleum rose 7.2 percent in March and 62.2 percent over the last 12 months.
  • The PPI for petroleum refineries rose 17.0 percent in March and 62.1 percent over the last 12 months.
  • The PPI for fuels and lubricants retailing rose 22.7 percent in March and 40.0 percent over the last 12 months.
• The Import and Export Price Indexes show changes in prices of nonmilitary goods and services traded between the United States and the rest of the world.
  • The Import Price Index for crude petroleum rose 15.6 percent in March and 62.0 percent over the last 12 months.
  • The Export Price Index for crude petroleum rose 19.1 percent in March. (This is a new measure, and we haven’t yet tracked it over 12 months.)

National or international events, whether started by Mother Nature or human action, affect the prices businesses and consumers pay for goods and services. We’ve seen this in the past with weather disruptions, such as hurricanes along the Gulf Coast that shut down oil drilling and refining. Current prices may be influenced by the war in Ukraine, the embargo on Russian oil, and other events around the world.

We can see the influence of these events in price changes throughout the production and distribution of oil-related goods and services. BLS estimates the changes in the prices that domestic producers receive through the PPI; this includes petroleum-related industries such as drillers and refiners and the margins on gasoline station sales. Gasoline retailers make money on the margins of their sales—the difference between how much they pay for the fuel they buy from wholesalers and the prices they receive from consumers. Margins for gas stations typically decline when oil prices increase. To learn more, see “As crude oil plunges, retail gasoline margins spike, then retreat.”

Some domestic producers import oil rather than purchase it domestically, and the Import Price Index reflects changes in prices they pay. Some domestic producers also export petroleum-related products, which is captured in Export Price Indexes. Ultimately, consumers purchase gasoline, home heating oil, and other petroleum-based products, and often producers pass price changes on to consumers. Thus, an increase in oil prices can result in higher costs at the pump, more expensive airline fares, and price increases for goods transported by trucks. The CPI reflects these higher prices consumers may face.

The price of oil and related products can change rapidly, adding to the challenges of collecting and publishing timely price statistics. Ideally, BLS would collect prices throughout the month for all goods and services in all price indexes. While that is a long-term goal, it is not simple to implement. Currently, BLS identifies the official “pricing date” for each index, as follows:

• We collect prices for the CPI throughout the month, with each outlet (such as a gas station) assigned one of three pricing periods, which roughly correspond to the first 10 days, second 10 days, and third 10 days of the month. Once established, prices are updated each month during the same pricing period.
• We collect prices for most items in the PPI as of the Tuesday of the week containing the thirteenth day of the month. This is the case for the petroleum-related items. (Some items in the PPI have prices collected throughout the month.)
• We obtain import price data for petroleum from the U.S. Department of Energy. We obtain export price data for petroleum from secondary source market prices. These data represent a weighted average of imported and exported oil throughout the month.

Let’s look at the price of oil over the past few months and how the BLS pricing dates might affect the price indexes.

Editor’s note: Data for this chart are available in the table below.

The chart shows the volatility of the oil prices, particularly in March. When the February CPI was released on March 10, West Texas Intermediate Crude Oil prices had already soared from $96 per barrel on the last day of February to over $123 two days before the CPI release. While consumers were feeling the pinch at the pump, this steep rise was not reflected in the February CPI data. Similarly, both the February and March PPI price dates (February 15 and March 15) missed the large run-up in oil prices in the first week of March. The Import Price Index, Export Price Index, and CPI did include the highest prices seen in early March, however.

BLS price indexes represent averages—average selections of goods and services, average weights, and typically average time periods. Over time, these indexes provide an accurate view of price change throughout the economy. But during periods of rapidly changing world events, and corresponding rapid changes in the price of individual commodities (and oil in particular), the index pricing periods may miss unusual highs and lows.