Producer Price Index Manual: Theory and Practice ... - METAC

Producer Price Index Manual
• Blending–putting together measured amounts
of products.
These steps are called process units because they
process the crude oil directly.
10.61 To compile a PPI for oil refining in Singapore
the price movements of commodities produced
for sale by oil refineries are measured. Motor gasoline,
jet fuel, kerosene, diesel fuel, fuel oil, lubricating
oil, naphtha, LPG (liquefied propane gas), and
asphalt are the primary outputs of oil refineries. Oil
companies had been successful in selling motor
gasoline to consumers under unique brand names
like Shell, BP, Exxon, Mobil, and so on. Despite
the differentiation, the products produced by refiners
are essentially the same. It is simple in terms of
data requirements and respondents’ burden to construct
a price index using sales revenue.
10.62 The weighting pattern in the PPI for petroleum
refining is based on the relative importance of
the commodities’ production value in the base year.
The production value is the sale value received by
manufacturers for the sales of their output.
10.63 Before conducting a regular price survey, it
is necessary to conduct a preliminary survey to
identify the actual product, specification, brand, and
grade of items produced by oil refiners. The survey
frame for conducting the preliminary survey is usually
obtained from the Census of Industrial Production
register. A list of establishments classified by
manufacturing activities, the products manufactured
(at seven-digit Standard International Trade Classifications,
SITC), and the corresponding sales values
of these products were extracted from the Census.
In most countries, oil refining is mainly concentrated
in a few very large petroleum refineries. If
the number of companies is few, no sampling is required,
and the coverage of the establishments that
engaged in oil refining can be exhaustive. For the
preliminary survey, customized forms with the major
commodity items (at seven-digit SITC) preprinted
were sent out to respondents requesting
them to provide the top-three-selling product brands
under each of the commodity items listed. In addition
they were requested to delete items that were
no longer manufactured and to add new items not
listed in the customized survey forms. They were
requested to rank the various brands in order of importance
and to provide a detailed specification or
description pertaining to brand, grade, size measurements,
frequency of production, unit of measurement,
and actual ex-factory prices ar which they
were sold.
10.64 The returns from respondents were reviewed
and verified through telephone inquiries to
ensure that the products or brands reported fell
within the commodity items requested. The final selection
of products for the monthly price survey
was based on how often and how regularly the
product was produced, how specific and detailed
the specifications were for pricing, and how significant
was the product’s share of the establishment’s
production. Based on these selection conditions,
items that were made to order or were produced on
project or ad hoc basis were excluded. This helps
reduce problems posed by the substitution of such
items in the future for price monitoring.
10.65 In Singapore, customized survey forms
preprinted with the description of each selected
brand item and unit of measurement are then sent to
the refiners for monthly prices collection. Respondents
are directed to quote ex-factory prices that
exclude outward transport charges and excise duties,
if any. The prices on the 15 th of the month or
the closest date are to be provided. Respondents are
encouraged to give transaction prices, not list prices
that can be substantially different. If ex-factory
prices were not available, respondents were requested
to state the basis of the quotation. The
prices reported must be consistent and comparable
from one reporting period to the next. Although
spot prices of oil products are published on a daily
basis in the newspaper, spot prices often reflect
only a minute proportion of total production. It is
more accurate, as well as quite cost effective, to obtain
actual transacted prices directly from the small
number of oil refiners involved.
10.66 In many countries, the government is concerned
with protecting air quality in the environment
and has enacted laws to reduce the level of air
pollution caused by the emission of pollutants from
motor vehicles. The production of cleaner motor
gasoline (unleaded petrol), as mandated by the government,
raised the production cost for refiners
manufacturing the clean gasoline. Manufacturers
faced with additional production costs increased the
price for the clean gasoline. Cleaner gasoline represents
a quality improvement because the characteristics
of the gasoline have changed. Therefore, the
price increase in the unleaded gasoline mandated by
the government should be subjected to an appropri-
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