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A Comparison Selected EIA-782 Data with Data FromOther of Sources
by Jacob Bournazian

Introduction
The Energy Information Administration (EIA) EIA-782survey series collects data on petroleum markets to fulfill legislative mandatesfrom Congress and to provide comprehensive information for evaluating market behavior. It includes three surveys: FormEIA-782A, "R.efiners'/Gas Plant Operators' Monthly Petroleum Product Sales Report;" Form EIA-782B,"Resellers'/Retailers' Monthly Petroleum Product Sales Report;:' and Form EIA-782C, "Monthly Report of Prime Supplier Sales of Petroleum Products Sold for Local Consumption."Any reference to the EIA782 prices refers to the series that includes both the EIA-782A EIA-782B and surveys. Any reference to the E[A-7S2 volumes refers to the E[A-782C survey series. Anyreference to the specific survey is identified as such. This article comparesthe data from the EIA-782survey series with other sources to assess the quality of the EIA-782 data. Significant differences and trends among data series mayindicate the need for changesin data collection and processing, the reporting population, survey or sample design, or maysimply reflect conceptual differences acrosssurveys. Thefollo~ving data sources were used to compare with tile EIA-782 series. For prices: * The Bureauof Labor Statistics (BLS)Office of Consumer Price Index (CPI) data for retail prices of motorgasolineand residential No.2 fuel oil. Tile BLSOffice of Producer Prices (PPI) data for wholesaleprices of motor gasoline, No. fuel oil and diesel fuel, andkerosene-type fuel. jet Oil Price Information Service (OPIS), a privately ownedpetroleum news and information source, for retail prices of on-highway diesel fuel. Form EIA-888, "On-Highway Diesel Fuel Price Survey,:' for retail diesel fuel. * prices of on-highway

*

*

FormEIA-878,"Motor Gasoline Price Survey," for retail pumpprices of gasoline.

For volumes: * Fon'n EIA-821,"AnnualFuel Oil and Kerosene Sales Report," for retail volumesof distillate andresidual fuel oil.

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o

EIA's Petroleum Supply Ammal (PSA) product supplied for volumes of distillate residual fuel oil, and motorgasoline. Federal Highway Administration (FHWA) retail volumesof motor gasoline. for

fuel oil,

o

A moredetailed description of each data source is containedin the Notessection at the end of this article.

Overview The EIA-782prices track closely with mher EIAsurveys and OPISprices while the BLSprices are higher than EIA-782prices. The E1A-782C volumedata were comparedwith data from other EIA surveys and the FFIWA data series. The EIA-782C volumes for motor gasoline and distillate fuel follow closely with the other data series. However, EIA-782C the residual fuel volumesare significantly below the levels shownby other EIAsurveys. The folIowing sections of this article discuss the differences among price and volume the data sources for No. 2 distillate fuel oil anddiesel fueI, gasoline, kerosene-type fuel, andresidual fuel. jet

Price Comparisons
Tables FEt - FE6showthat EIA-782national prices are generally lower than the BLS,EIA-878, and EIA-888 price data series and follow OPISprices closely. Retail EIA-782 prices include data from both the EIA-782A EIA-782Bsurveys. Differences in the survey methodologyacross and the surveys explain someof the price differences. The 13LS, EIA-878, ElA-888, and OPIS prices include taxes, whereas EIA-782 prices exclude taxes. For Tables FE3and FE5, a U.S.-total-weighted Federal and State tax provided by the FHWA deducted from 13LS, EIA-878, EIA-888, and OPIS retail prices. No is adjustment was made to the BLS, EIA-878,EIA-888, and OPISprices for local sales taxes and other State and local fuel taxes such as environmentaltaxes, undergroundstorage tank taxes, and transportation use taxes becausethere were not sufficient data avaiIable for making adjustments the U.S. level. at BLSretail prices are collected from urban areas, whereas EIA-782,ElA-878, and EIA-888 prices are collected from both rural and urban areas across a region or state. The BLS wholesale prices used to calculate the Producer Price Index are collected from a sample of refiners and represent the refiners' selling price for the selected refined products. TheEIA782 gasoline, No. 2 fuel oil and diesel prices are collected from a census of refiners and a sampleof resellers and retailers. EIAresale prices represent sales to a seller who will reselt the product, i.e., sales by refiners that are not to the ultimate consumer. mosttransactions, In the wholesale price and resale price are the same. However, there are circumstanceswherea

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refiner may make a wholesale sate to an ultimate consumer. EtA began using the term "Reseller" in I983 to excludewholesaletransactions to ultimate consumers. The EIA-782uses current period volumeweights, while BLS,the EIA-878and EIA-888use fixed weights 1o compute weightedaverage prices. The EIA-782prices represent all sales during the month, while BLSprices represent the averageof outlet prices collected on different days across the first three weeksof the month. The EIA-878and the EIA-888weeklysurveys also represent a point in time in the week. In this article, the annual EIA-878and EIA-888prices were calculated using simple arithmetic means the publis|~ed weekly of prices.

Residential No, 2 Fuel Oil Table FEI shows BLSprices are 3 to 5 percent higher than EIA-782prices from 1995 through 2003. The difference between the two series widened from 3 to 5 percent after 1999 and then declined to the usual 3 percent level afer 200t. BLSprices are obtained from urban areas only and do not reflect complete geographic coverage for this product. EIA-782prices are volume weightedprice estimates.

TableFE1.'U.S. ResidentialNo. 2 Distillate Prices, t995-2003

1995 1996 1997 1998 I999 2000 2001 2002 2003

86.7 98.9 98.4 85.2 87.6 131.1 125.0 112.9 135.6

89.3 I01,9 101.4 8&0 90.0 136,0 I31.0 116.2 140.0

103.00% 103,03% 103.05% 103.29% 102.74% I03,74% 104.80% 102.88% I03.28%

EIA Source:Table 18 Petroleum Marketing Monthly.

No. 2 Fuel Oil Resale Table FE2 shows BLSwholesale prices vary widely will EIA-782A resale prices between a range of 5 to I4 percent higher than EIA-782A. differential betweenthe series has decreased The during the past 2 years. One possible reason is that the EIA-782A prices are current period volumeweighted averages, and larger volumesales by refiners at lower prices receive greater

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weight in calculating EIA-782A prices. The BLSprices are calculated using weights derived from other (non-current) time periods. BLS does adjust their weights on a monthlybasis. Table FE2U.S. Refiner Resale No, 2 Fuel Oil Prices, 1995-2003

1995 1996 1997 1998 1999 2000 2001 2002 2003

51.1 63.9 59.0 42.2 49.3 88.6 75.6 69.4 87.9

56.6 69.4 64.9 48.2 55.9 93.3 84.5 74.8 95.6

t10.80% 108.66% 110.04% 114.22% 113.32% 105.32% 111.79% 107.77% 108.75%

EIA Source:Table4 Petroleum Markeling Monthly. Diesel Fuel On-Highway Table FE3shows the annual estimates for EIA-782,EIA-888, and OPISretail on-highwaydiesel fuel prices from 1995-2003. EIA-782, EIA-888,and OPIS prices vary mostly by I t~ 2 percent and track closely over this time period. Aithough State and Federal diesel fuel taxes were subtraGted from the OPISand EIA-888 prices, no adjustment was madefor local sales taxes, and additional State and/or local taxes relating for environ|nentalregulations and transportation use. Table FE3. U.S. Retail On-Highway Diesel Fuel Pdces,1995-2003

1995 1996 1997 1998 1999 2000 2001 2002 2003

67.0 78.8 74.5 59.3 68.5 103.6 94.3 86.2 104.4

67.5 80.0 75.8 60.2 67.7 104.5 95.4 87.3 105.6

66.0 78.8 74.7 58.9 66.5 103,7 94.4 86.6 104.6

I00.72% 101.55% 101.79% 101.52% 98.83% 100.87% 101.20% 101.28% I01.12%

98.53% 100.05% 100.24% 99.26% 97.10% 100.14% 100.15% 100.44% 100.19%

EIA Source: Table 16 Petroleum Markeling Monthlyfor EIA-782 data.

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OPISprices are a compilation of different sources obtained from several credit card issuers and do not.reflect completesales coverage for this product. Outlets from leading truckstop chains, as well as outlets participating in a price and credit reporting service report daily retail prices to OPIS. Approximately4,500 price quotes are reported daily. In this article, the annual OPIS prices at the U.S. level were calculated using simple arRhmeticmeansbased on an average of the prices reported as of Monday each weekof the year. of The EIA-888 prices are based on a sample of 350 outlets. The sample uses a probability proportional to size samplingtechnique. TheU.S, average is calculated using a weightedaverage of the regional prices wherethe weights are volumesreported on another EIAsurvey at the time ofsampIeselection. Diesel Fuel Resale Table FE4shows the annual estimates for EIA-782A resale and BLSwholesale prices for No. 2 diesel fuel. 13LSprices are consistently higher with the difference doublingfrom 7%in 2002 to 14%in 2003. This product category contains prices for both low and high sulfur diesel fuel. The EtA-782Avolume weighted averages reflect tile relative importance of these b, vo sulfur categories reported by refiners in the calculation of the averageprice. TableFE4.U.S. RefinerResale 2 Diesel Fuel Prices, "1994-2003 No.

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

52.9 53.8 65.9 60.6 44,4 54,6 89.8 78.4 72.4 88.3

56.0 57.0 69.9 64.6 47.4 57.1 93.1 83.6 77.7 100.9

105.94% 105.87% 106.06% 106.52% 106.83% 104.58% 103.69% 106.66% 107.35% 114.29%

EIA Source:Table 4 Petroleum Marketing Monthly. Motor Gasoline - Retail Table FE5shows the annual estimates for EIA-782,EIA-878,and BLSretail prices from 199"-I2003. This paper only discusses tile prices for regular grade gasoline. BLS prices vary bet~veen5 and 8 percent above the EIA-782prices. EIA-878prices vary bet~veen I and 6 percent above E[A-782prices during the same time period. Even though beth BLSand EIA-878prices have beenadjustedfor fhderal andstate taxes, these prices still contain additional taxes relating to local sales taxes and highwayuse taxes that could not be removed this analysis. As a result, the for EIA-782 prices should be lower than these other series.

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Table FES. U.S. Retail I~/lotor GasolinePrices, RegularGrade,1994-2003

1994 1995 1998 1997 1998 1999 2000 2001 2002 2003

69.4 72.5 81.2 80.0 62.5 73.0 106.6 99.6 91.6 111.0

70.1 73.9 73.7 77.3 85.0 85.7 82,0 85.5 64.4 67.4 75.2 78.2 109.6 112.2 103.2 107.3 96.1 97.4 117.2 120,2

101.01% I01.66% 104.68% 102,50% 103.04% 103.01% 102.81% 103.61% 104.91% 105.59%

106.48% 106.62% 105.54% 106.88% 107.84% 107.12% 105.28% 107,76% 106.33% 108.26%

EIA Source: Table 31 Petroleum MarketingAnnual EIA-782 for data. The annual BLSprices were calculated using simple arithmetic meanof monthly prices. The BLSmonthly prices are calculated based on approximately 900 price quotes. Approximately25 to 35 prices are colIected from outlets in each published geographic ar~a, ETA-782 prices represent all sales transactions through company-operated outlets by all refiners and a sample of reselIers/retailers throughout the U.S. Ther¢ are limitations in comparing simple average data a series with a volumeweightedaverage price series across monthsbecause of the effect of volume changesthroughoutthe year on the annual price estimate, The EIA-878also uses fixed volumeweights for calculating U.S. prices based on approximately 800 price quotes each week. Separate outlet weights are used based on the sampled eutlet's number of pumps, a proxy for sales volume, to obtain weekly averages for the specific formulations, grades and geographicareas. The weights used in aggregating grades, formulations and geographic areas are derived using volume data from the EIA-782C"Monthly Report of Prime Suppliers Sales of Petroleum Products Sold for Local Consumption," and demographic data from the Bureau of the Census and Departmentof Transportation on population, numberof gasoline stations and numberof vehicles. A simple average of weeklyprices was calculated to obtain the annual average price. The EIA-782 prices utilize all sales transactions throughout the reference month, whereas the EIA-878prices are Monday morningprices as of 8:00 A.M. l'¢lotor Gasoline - Resale Table FE6 show~the annual estimates for EIA-782A BLSresale motor gasoline prices from and 1994 - 2003. Except for 1994, the BLSprices vary betweenI and 3 percent from the EIA-782A during this ten-year period. The data track closely during 1998- 2002despite increased price volatility in the gasoline markets daring this time period. The difference widenedduring 2003 whenthere were strong price increases in gasoline markets.

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Table FEB.U.S. Refiner ResaleMotor Gasoline Prices, RegularGrade, 1994-2003

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

56.6 59.3 68.5 67.3 49.9 62.0 94.2 86.5 80,5 98.I

59.2 60.9 70.7 69.6 51.1 62.3 92.5 87.9 81.0 100.6

I04.64% 102.68% 103.26% 103.41% 102.42% 100.51% 98.14% 101.58% 100.51% 102.54%

EIA Source:Table 6 Petroleum MarketingAnnual.

Kerosene-TypeJet Fuel - Resale TableFE?shows annualestimatesfor EIA-?82A the refiner resale kerosene-type fuel prices jet and BLS~vholesale kerosene-type jet ~uel prices from 1994- 2003. The two price series vary betweenI and 5 percent during I99,1- - I998. The price differential narro~vs after 1998 and remains stable at approximately t percent. BLSwholesale prices are expected to be similar to EIA-782A resale prices since EIAkerosene-type jet fuel prices are collected from a census of refiners on FormEIA-782A BLScollects from a sample or'refiners. and

Table FE 7. U.S. Kerosene-Type Fuel ResalePrices, t994-2003 Jet

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

53.4 53.9 64.6 61.3 45.0 53.3 88.0 76.3 71.6 87.2

53.8 55.1 67.6 64.0 46.7 53.9 89.1 78.2 72.2 87.3

100.75% t02.23% 104.64% 104.40% 103.83% 101.16% I01.21% 102.52% 100.78% 100.08%

EIA Source:Table 4 Petroleum Marketing Monlhly.

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Volume Comparisons

EIA-782Cvolumes are comparedwith volumes reported in the EIA-821, the PEA, and the FHWA data series. Product supplied in the PS..t is an estimate of the demand petroleumproducts. It for is calculated by adding and subtracting volumes as they move in and out of the primary distribution stream. Sales volume data from the EIA-821 reflect the transfer of product title from a seller to a buyer whereas the EIA-782C measures sales into the States where the products are ultimately consumed. FHWA doesn't collect actual sales data on gasoline and diesel fuel. States report their fuel volt~mes to FHWA based on the beginning inventory at the terminal facility minusexports plus shipmentsto the terminal during the reporting cycle. Thedifference in survey populations, concepts and methodology underlie someof the differences that exist betweenthe EIA-821,the PSA,and the FHWA series. data Distillate Fuel Oil Table FEB showsvolumesof distillate fuel oil for the EIA-782C, EIA-82I, and .PS,,I series from 1993 through 2002. EIA-782C volumes have been below EIA-82t volumes since I993 and below PS:t volumes since 1997. The differential continues to grow wider after 1999. Table FEBalso shows that the difference between the EIA-782C EIA-82I volumes is greater than and the difference betweenthe EIA-782C the PS:I volumes. and

Table FEB.U.S. Distillate Fuel Oil Volumes, 1993-2002

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

48,029 49,188 49,332 51,753 51,903 52,371 54,614 55,670 57,344 55,237

48,290 50,424 51,469 53,379 54,366 55,306 57,573 59,501 59,911 59,343

46,622 48,477 49,i58 51,73I 52,665 53,064 54,759 57,217 58,971 57,885

100.54% 102.51% 104.33% 103.I4% 104.75% 105.80% 105.42% i07.06% 104.48% 107.43%

97.07% 98.55% 99.65% 99.96% 101.47% 101.32% 100.27% 102.78% 102.84% 104.79%

EIA Source:Table 50 Petroleum MarketingAnnualfor EIA-782C data. Table $5 Petroleum SupplyAnnualfor PSA data. Table1 Fuel Oil andKerosense Sales, 2002 EIA-821 for data.

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All three data series shoxv a decline in volumefrom 2001 - 2002. AlthoughTable FEBsho~vs total distillate volumes,a closer review of the energy use sector volumesin the EIA-821data series (not shown this table) provide someexplanationfor the variation be~veen data series. in the EIA-82Idata showthat sales of distillate fuel oll declined in the industrial, commercialand electric powersectors as moderatenatural gas prices reduced the opportunities and need for fuel switching from natural gas to distillate. Onepossible source for the wideninggap betweenEIA821 and EIA-782C volumesis the sales reported for on-highway use, whichcomprised 58%of all distillate sales in 2002 in the EIA-821data series. The EIA-821on-highwayenergy use sector showsan increase of approximately27%since t996 and is the largest component contributing to the increase in distillate volumesfor that survey during the past 7 years. The EIA-821volumes for on-highway are obtained fi'om the Federal Highway use Administration and used in place of data reported for this category. However, some EIA-821 respondents may report sales to commercial institutional fleet vehicles in the commercial category rather than in the onand use highwayuse category. If the commercialcategory contains someon-highwayuse volumes, and exogenousdata are used to replace the data for on-highwayuse, then somedouble counting of distillate volumesfor transportation use on the EIA-821 occur. If sales to fleet vehicles, may whichare reported in the commercialcategory, are increasing at approximatelythe samerate as other distillate sales for other on-highway use, then the amount double counting of distillate of" sales in the EIA-821 survey mayalso be increasing over the past seven years, and maycontribute to any differences betweenthe EIA-782C EIA-82tdata series. and Motor Gasoline Table FE9shows volumes of motor gasoline from the EIA-782C,PS..I, and FHWA series from 1993 through 2002. Table FEg. U.S. Motor Gasoline Volumes,1993-2002

1993 117,886 I14 607 I16 614 97.22% 98.92% 1994 120,151 116 523 I18 531 96.98% 98.65% 1995 122,582 1194O5 120876 97.41% 98.61% 1996 123,904 120 969 123327 97.63% 99.53% 1997 125,632 122 901 125045 97.83% 99.53% 1998 128,696 126 518 128504 98.31% 99.85% 1999 131,066 129 247 132261 98.61% 100.91% 2000 129,173 129 876 132280 100.54% 102.41% 2001 132,029 13t 991 134110 99.97% 101.58% 2002 135,164 135 640 137 664 100.35% 101.85% EIA Source:Table 48 Petroleum MarketingAnnualfor EIA-782C data. Table $4 Petroleum SupplyAnnual PSA for data.

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EIA-782C and PSA Table FE9shows the differential between the EIA-782C volumes and the PSAvolumes narrowed during the past ten years with the difference being within I% since I999. Onerea2;on tl~e differential narrowedduring the I990s was that the PS,4 improvedits coverage of downstream blending of finished motor gasoline by including gasoline blenders in tile survey reporting popuIation, Blendingof fuel ethanol, methanol, methyl tertiary butyl ether (MTBE), other and blend stock with gasoline often occurs downstream from the refineries. EIA-782C and FHWA Table FE9 also shows that EtA-782Cvolumes generally track closely with the FHWA motor gasoline volumesand the differential has remained at 2 percent since 2000. FHWA estimates the gasoline consumptionby the federal, state, and local governmentsince these volumesare not taxed. Also, FHWA various models to estimate non-highway use in each state. FHWA has estimates federal governmenthighwaygasoline use based on information obtained from federal agencies. State-reported federal use of gasoline in excess of the FHWA estimate is presumedto be either civilian non-highway military use and is eliminated from the Federal figure reported or by the State. The constant level of the difference in volumesbetweenfl~ese two series maybe due to some under coverage of the market by the EIA-782C or differences in how FHWA estimates gasoline sales for off-highwayand government use. Residual Fuel Oil Table FEI0 shows volumes of residual fuel oil Fromthe EIA-782C,EIA-821,and PSA from 1993 through 2002. TableFE10.U.S, Residual Fuel Oil Volumes, 199;3-2002

1993 1994 1995 I996 1997 1998 1999 2000 2001 2002

13,555 12,753 9,623 10,610 t0,583 11,513 10,259 9,733 10,285 8,259

15,064 14,825 12,318 13,257 12,504 14,730 13,328 13,211 13,609 10,362

16,559 15,652 13,061 13,000 12,218 13,598 12,724 13,375 13,508 10,731

111.13% 116.25% 128.01% 124.95% 118.15% 127.94% 129.92% 135.73% I32.32% 125.46%

122.16% 122.73% 135.73% 122.53% 115.45% 118.11% 124.03% 137.42% I31.34% 129.93%

EIA Source:Table 49 Petroleum MarketingAnnual EtA-782C for data. Table$6 Petroleum SupplyAnnual PSA for data. Table2 Fuel Oil andKerosene Sales, 2002 EIA-821 for data.

10

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EIA-782C PS,'I and EIA-821 vs. Table FE10shows the EIA-782C significantly below the P,_7.4 and EIA-821data series. The is difference between EIA-782C the other two series is quite large and fluctuates relative to the and the EIA-782C from 11~ in 1993 to a high of 37%in 2000. The gap between the EIA-782Cand the EIA-821 slightly declined since 2000but there remains a significant gap of 25%in 2002. has The gap between the EIA-782Cand PSA data has remained at approximately 30%since 2001. The large and continuous divergence bev, veen the EIA-782C the other V, vo series indicates and that the EIA-782C missingsomeresidual fuel oil sales. is Residual fuel oil sales plunged in 2002, with the EIA-782C volumesdeclining by 20%,EIA-82t declined by 24%and PSA declined by 21%. Although Table FEI0 shows total residual fuel volumes, a closer review of the energy use sector volumesin the EIA-821data series (not shown in this table) provide someexplanation for the variation betweenthe data series. Environmental regulations restricting fuel use, abundantsupplies and moderateprices for natural gas prices all contributed to the sharp decline in residual fuel sales. The EIA-B21 data series showselectric power and vessel bunkering, the Iargest categories for residual fuel, failing by 37%and 10% respectively,during 2002. The gap between the EIA-782Cand the EIA-82t narrowed by 7%but the gap between the EIA-782Cand PSAremained approximately the same between 200I and 2002. The narrowing of the large gap between the EIA-782C the EIA-821from 2001 to 2002 and suggests that the sales related to fuel switchingfromnatural gas to residual fuel that occurredon a large scale during 2001maycontribute to the divergence bet~veen the EIA-782C the EIA-821 and and PSAdata series.

Table FEll. EIA-821and EIA-7820U.S. Residual Fuel Oil Volumes by PADD,2000-200Z (Million Gallons) 2000 2001 2002 EIA-782C ResidualFuel Oil US 9,733 10,285 8,259 EIA-821 ResidualFuel Oil US 13,211 13,546 10,362 Percentage EIA-782C/EIA-821 73.67% 75.93% 7"9.70% Percentage Across PADDs EIA-782CIEIA-821 PADD 1 73.75% 73.63% 76.62% PAD Subdistrict 1A 101.11% 83.18% 96.66% PAD Subdistdct IB 87.42% 87.84% 86.02% PAD Subdistrict lC 55.20% 59,69% 64.65% PADD 2 48.20% 48.47% 60.40% PADD 3 67.68% 80.70% 82,06% PADD 4 328.57% 332.71% 297.10% PADD 5 83.47% 82.49% 87.66% EIA Source;Table49 Petroleum MarketingAnnual EIA-782C for data. Table2 Fuel Oil andKerosene Sales, 2002 EIA-821 for data.

11

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Table FEll compares the EIA-782Cand EIA-82I volumes for 2000 - 2002 across the live PADD regions. The data showthat during this time period, the 782Cdata are missing significant volumes in PAD Sub-district l C and in PADDs and 3. Although, the EIA-782Cvolumes are 2 approximately 3 times as high as the EIA-821 volumes in PADD PADD is the smallest 4, 4 market with approximately 3%of total US residual fuel sales. Sub-dlstrict IC comprises approximately 25%of U,S. residual fuel sales and PADD constitutes approximately 15%. 3 Additional research is needed, mainly in PAD Sub-district IC and PADD to determine the 3, causes for the divergence betweenthe EIA-782C EIA-821data series. and

Summary
The EIA-782petroleum product prices were comparedwith alternative sources from other EIA surveys, BLS,and OPISprices. The EIA-782prices tracked closely with other EIAsurveys and OPISprices. BLSprices were higher than EIA-T82 prices, and tbe price differences widenedin 2003 across all products. Somedifference was expected between these two series because EIA collects prices from a census of refiners and BLScollects prices Froma sample of refiners. The E[A-782Cvolumedata were compared with data from other EIA surveys and the FHWA series. TheEIA-782C volumesfor motor gasoline and distillate f, ael track closely with the other data series. However, EIA-782C the residual fuel volumesare significantly belowthe levels shownby other EIA surveys. The large difference between the EIA-782C residual fuel volumes and the other data sources requires further investigation into the reporting practices of the EIA-782C respondentsfor this product. Other differences exist among data sources because of different the reporting populations, geographicand/or marketcoverage, survey design, ,nethodology, reference period intervals, and product and energy-usesector definition~.

Notes
Data Sources The FormEIA-782A, "Refiners'/Gas Plant Operators' MonthlyPetroleum Product Sales Report," collects monthlyprice and volumedata at the State level for 14 petroleum products for various retail and wholesalemarketingcategories, It is a census of refiners and gas plant operators. The frame is updated on an ongoing basis using respondent lists Fromsurveys such as the FormEIA810, "MonthlyRefinery Report;" the FormEIA-816, "MonthlyNatural Gas Liquids Report;" and industry trade publications. Currently, 1 I0 companies respond to the EIA-782A survey. The FormEIA-782B, "ResellersVRetailers' Monthly Petroleum Product Sales Report," is sent to a sample of resetlers and retailers of motor gasoline, distillate, propane, and residual Fuel oil. Respondentsto FormEIA-863,"Petroleum Product Sales Identification Survey," are used as the sampling frame of resellers and retailers for the EIA-782B. Firms having 5 percent or more of

[2

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sales in a State are seiected with certainty. The remaining companieson the frame are sampled using probability proportional to size methodology geographicarea, product, and type of sale. by The EIA-782B sample includes approximately 2,000 companies. The Form E[A-782C,"Monthly Report of Prime Supplier Sales of Petroleum Products Sold for Local Consumption," collects volumesof prime supplier sales of selected petroleumproducts into States where they are locally sold and consumed.A prime supplier is a firm that produces, imports, or transports any of the selected petroleum products across State boundaries and local marketingareas and sells the product to local distributors, local retailers, or end users. This survey provides an accurate measureof consumption most States. Currently, 183 firms respond in to the EIA-782C survey. Data collected on the Forms EIA-782A, EIA-782B, and EIA-782C are published in the Petroleum Marketing Mo~thlj, (PMM) the Petroleum Marketi~ Amutal (P~'IA). and N In addition, production, import, and export data collected by EIA's Petroleum Division are published in the Petroleum Supply ~.Ionthly (PSM)and the Peo'ole~anSuppl.v Ammal (PSA). The PetroleumDivision uses the Petroleum Supply Reporting System(PSRS)for data collection. The PSRS composedof a family of data collection survey forms, data processing systems, and is publications systems. Detailed data on refinery and natural gas plant operations, bulk terminal and pipeline stocks, petroleum products imports, and movements petroleum products among of PetroleumAdministration for Defense(PAD) districts are collected monthly. Figures for product supply originate from Forms EIA-810, "Monthly Refinery Report;" EIA-81 I, "Monthly Bulk Terminal Report;" EIA-812, "Monthly Product Pipeline Report4" EIA-813, "Monthly Crude Oil Report;," EIA-gl4, "MonthlyImports Report;" E1A-816,"M~nthlyNatural Gas Liquids Report;" and EIA-817, "Montl'dy Tanker and Barge Movement Report." Aggregate export data obtained from the Bureau of the Census are also included in computations for the PS~'I and PS.4. The PMA and the PSA may contain revisions of the data published in the PMM and the PSM, respectively, due to late submissions revisions to the monthly or data. The FormEIA-821,"AnnualFuel Oil and KeroseneSales Report," collects data on the sales to end users of distillate fuel oil, residual fuel oil, and kerosene. Thesamplesize is approximately 4,0013 for 2002. The data are used to determine the level of sales by energy-use category and product at the State, regional, and national levels. Thesamplingframe for the EIA-821 also is derived from the respondents to Form E1A-863.The EIA-863is a quadrennial census used to collect information on size, type, and geographiclocation of firms selling petroleum products. Data from the Federal Highway Administration (FHWA)of the U.S. Department Transportation replace EIA-821 data reported as on-highway diesel sales. The Highway Statistics Division of the FHWA collects information related to highway transportation. Sales volumesof motor gasoline are published on a calendar year basis and are a

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cumulative tabulationgross of gallons gasoline of rcportcd wholesale by disMbutorsState to motor Fuel lax agencies. The FHWA collects information on finished motor gasoline, with no distinction madeamong motor gasoline grades. The data include gasoline for both highwayand non-highway use. The FHWA includes gasohoI but excludes expor|s, fuels For military use, and dealer transfers. The Bureauof Labor Statistics (BLS)publishcs the aggregate index for householdFuels and its component indexes for motor fuels. Retail prices are collected monthlyby BLSrepresentatives in the urban areas, and support the estimation of'the Consumer Price Index (CPI). Wholesale prices are collected monthly support the estimation of the ProducerPrice Index (PPI). and The CP! and PPI use fixed volumeweights to measure the change in price ovcr time. The CP[ measures the change in prices For a defined market basket of goods and services and tile PPI measures the change in prices received by domestic producers For their output. Approximately900 retail prices are collected For regular grade gasoline in approximately 87 urban areas across the country and include all taxes directly associated with the purchaseand the use of the items. The 87 areas cover 39 States and the District of Columbia.The PP! collects prices from a sample of domestic refiners. Although most PPI prices are collected on one particular day of the monlh, the prices for refined petroleum products are commonly average an of prices during the first I0 working days of the month,or the prices received by oil refineries on the 10~' workingday of each month.

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West!a~.
1988 WL 227932 (Comp. Gen.), B- 230,556 (C~te as: 1988 W7~ 227932

COMPTROLLER Subject:

GENERAL Set-Aside

Defense Fuel Supply Center's Small Business Procurements (B-230556; Code 396917) September 6, 1988

To: Group Director, NSIAD--John Rinko Thru: Senior Attorney, OGC--A.R0 Kasdan DIGEST The Defense Fuel Supply Center's (DFSC) small business partial set-aside procedures for the acquisition of its fuel supplies, comply and are consistent with the Small Business Act, 15 U.S.C. 631 et.seq., as well as other applicable Federal procurement laws and regulations. The DFSC procedures have been approved as deviations from applicable procurement regulations for over 20 years, and we previously considered these procedures as a reasonable exercise of DFSC's discretion. See B-168576(2), April 28, 1971 and B-171289, April 28, 1971. This responds to your request for our views on the legality of the Defense Fuel Supply Center's (DFSC) small business set-aside practices (procedures) for acquisition of its fuel supplies, In his letter of January ii, 1988, to GAO requesting this review, Senator Max Baucus questioned whether DFSC's small business set-aside procedures afford small business a fair opportunity to compete for these fuel acquisitions. He has asked GAO to determine whether DFSC's procurement procedures are consistent with the Small Business Act, as well as other applicable Federal procurement laws and regulations. For the reasons given below, we believe that DFSC's small business set-aside procurement procedures comply and are consistent with those laws and regulations. Background The DFSC purchases its bulk fuel supplies for the Department of Defense's (DOD) domestic requirements in a non-tradit±onal way. It makes two major buys of bulk fuels with multiple contract awards based on a geographical division of the country: Inland/West and East/Gulf. It uses a bid evaluation model developed in the 1960's and 70's which allows it to select the particular combination of contract awards for a specific buy which will fulfill the goverr~ment's requirement at the overall lowest cost (product plus transportation cost). Under this model, multiple awards are needed at many locations so that each individual requirement or locatfon can be completely supplied. Usual procedures of awarding contracts to the lowest sources do not provide the least total cost pattern of awards. DFSC solicitations request offers from all suppliers, including both large and small business firms, for needs of all DOD locations in the particular geographic © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.

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1988 WL 227932 (Comp. Gen.), B- 230,556 (Cite as: 1988 WL 227932 (Comp.Gen.))

area. Using the model developed and taking into account quantities reserved for qualified minority small business firras and small business set-asides, prices for bulk fuels at the various locations in the region are established. DFSC must assure that the small business firms eligible for set-asides are offered an opportunity to receive contracts at a particular location at prices which are not higher than ~he maximtlm unit price DFSC would otherwise have to pay. It uses one of three methods--the balanced price, the step price and the matched price--depending on the pattern of bids received to determine the set-aside price. This price is then offered to small business and they have an opportunity to accept or reject it. If i~ is rejected, the amount set-aside is offered to other sellers at that location to avoid any resolicitation. ~ 2 Since 1960 DFSC procedures have been approved as a deviation or exception from procurement regulations applicable to small business partial set-asides. The most recent extension of this exception occurred in May 1987 when the DFSC procedures were approved as a deviation from the applicable provisions of the Federal Acquisition Regulation (FAK 19.507, and 19.508(d) ) and of the Defense Supplement to the FAR (DFAR 19.508(d) and 19.508(70) ). DFSC believes that procedures are necessary to assure awards to small business concerns at prices that are fair and reasonable to the government and to the concerns. DFSC also argues that its procedure results in small business receiving an equal to or higher price for their fuel than they would have received if the standard FAR small business partial set-aside procedures were used. Under the FAR, the price for a partial set-aside is "... the highest unit price(s} in the contract(s} for the non-set-aside portion .... " FAR 52.219.7 In his January ii letter, Senator Baucus expressed concern that the DFSC's partial set-aside procedure may not be consistent with the spirit of the Small Business Set-Aside Program. He stated that in DFSC procurements small businesses do not engage in price competition with other small businesses. Since the "match price" for the fuel is largely set by the prices submitted by large fuel suppliers, small businesses are forced to compete with the cost of production of large suppliers. He therefore contends that DFSC's procedure does not offer small businesses the "maximum practical opportunity to participate in the performance of contracts let by any Federal agency," referring to the Small Business Act, 15 U.S.C. 637. [~-Nl] Question: Does the DFSC small business pa=tial set-aside procedure comply the Small Business Act and other federal procurement laws and regulations? with

Answer: Yes. Although the DFSC small business set-aside procedure is an approved deviation from FAR and DFAR provisions, it reserves for small business a portion of a particular acquisition as long as the price does not exceed the market price. The deviation from FAR and DFAR set aside procedures is required because of the nature of DFSC's acquisition of bulk fuel supplies. No provision of the Small Business Act or the FAR or DFAR require that small business compete only against each other in setting the price for the small business set-asides. GAO has previously found substantially similar DFSC procedures to be reasonable. Explanation: The Small © 2006 Business Act, 15 U.S.C. 631 et. seq., is designed Works. to

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1988

WL 227932

(Comp.Gen.),

B- 230,556

(Cite as: 1988 WL 227932 (Comp.Gen.))

protect the economic interests of small business concerns, and "... to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the government be placed with small business enterprises ..." 15 U.S.C. 631(a). (Emphasis added.) Identical policy objectives stated in the Armed Services Procurement Act (ASPA), i0 U.S.C. 2301(b), and Federal Property and Administrative Services Act (FPASA), 41 U.S.C. 252(b), which respectively govern military and civilian acquisitions. Part 19 of the EAR implements the small business acquisition-related provisions of the Small Business Act and the applicable provision8 of the ASPA and FPASA. Also, provisions of the DFAR apply to small business set-aside in DOD acquisitions. *3 To achieve the 5mall Busines3 Act's "fair proportion policy", both the Act and the FAR give federal agencies broad authority to award contracts to small business, including on a total or partial set-aside basis. 15 U.S.C. 644(a) and FAR 19.5. An agency may not award a contract to a small business firm if the agency's cost would exceed a fair market price, 15 U.S.C. 644(a). [EN2] Relatedly, the FAR set-aside procedures provide that in both total and partial procurement set-asides, the contracts awarded must be made only at reasonable prices. FAN 19.502-2 and 19.502-3. The FAR a!ao requires that specific clauses be inserted for set-as/de contracts, i,e., FAR 52.219-6 (total set-asides) and 52.219-7 (partial set-asides). IF N3] For partial set-asides, FAR 19.502(3) (c) requires that the contracting officer must first award the non-set-aside portion using normal contracting procedures. Both large firms and businesses eligible for the ~et-a~ide submit offer~ on the non-set-aside portion. After the non-set-aside portion is awarded, the contracting officer negotiates with small business firms who have submitted responsive (acceptable) offers on the non-set-aside portion. The set aside portion will be awarded at the highest unit price{s) in the non-set-aside portion. FAR 52.219-7, part (b) (3) of the required contract clause. If a set-aside acquisition is not awarded, the supplies or services for which no award was made is recompeted. FAR 19.507(a). The DFSC procedures differ from the FAR procedures in two subsKantial respects which are said by DFSC to be required to effectuate bulk fuel acquisitions. First, the award of set-aside quantities i~ made at prices which would have been paid without the set-aside. This can differ from the "highest unit price{s)" paid under the FAR. This variance is the result of the nature of the petroleum refining business, in most businesses, prices will often drop as more product is produced. In the petroleum refinery business, the contrary is the case. Since the refining process can produce many products, e.g., jet fuel, gasoline, diesel fuel, etc., increased quantities of one product are produced at the expense of others and the price of additional production rises. The second difference is that in the event of set-aside failures, the set-aside portion is not recompeted. Under the DFSC procedures both large and small firms are required to submit offers on total quantities just as if there was no set-aside. In this way, in the event a set-aside acquisition cannot be filled, othe~ offers can be considered.

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1988 WL 227932 (Cite as: 1988

(Comp.Gen.), WL 227932

B- 230,556

(Comp.~n.)}

Under both the FAR partial set-aside regulation and the DFSC deviation large and small business compete against each other. Under the former, the large and small firms submit offers on the non-set-aside portion which is awarded first. The set-aside portion is negotiated with qualified small business who have submitted responsive offers under the non-aside portion. ~nder the DFSC procedure, both large and small firms compete by submitting offers on total quantities. *4 We have found no court cases or GAO decisions or opinions which have specifically addressed the issue whether the FAR partial set-aside procedures are a reasonable implementation of the requirements of the Small Business Act. However, GAO has considered 0ESC procedures substantially similar to those in effect today as a reasonable exercise of an agency's discretion. In B-168576(2), April 28, 1971, a small business protested the reduction of the small business set-aside and proposed certain changes in DFSC's set-aside procedures. At that time, DFSC's procedures were a deviation from applicable ASPA regulations. The protestor proposed that the formula DFSC uses to calculate the prices paid for the quantities accepted be modified. Under this proposal, the price for the set-aside would be set on the basis of the prices and quantities remaining on each offeror's bid after subtracting the amount awarded on the non-set-aside portion. DFSC pointed out that the proposed procedure would not only cost the government more money, but might actually result in lower prices for set-asides as the percentage of the total procurement which is set-aside increases. GAO stated that it would not substitute its judgment for that of DFSC "unless it [DFSC] has acted in an arbitrary or capricious manner." We concluded that based on the record, there was "substantial evidence to support DFSC decision not to revise its small business set-aside procedures," as suggested by the protestor. In B-171289 , also decided on April 28, 1971, GAO concluded that it failed to see how evaluation procedures--substantially similar to DFSC present procedures--would be contrary to the "congressional purpose and intent in establishing the small business set-aside procedure, 15 U.S.C. 631." In conclusion, we find no reason to question our previous positions that DFSC procedures are in compliance with the Small Business Act and are a reasonable exercise of agency discretion to implement the policy of the act. Substantially similar DFSC procedures have been approved as deviations from applicable procurement regulations for partial set-asides for over 20 years. Our view is reenforced by information DF$C has provided that shows that the DFSC set-aside procedure results in small businesses receiving an equal to or a higher price for their fuel than under the FA~ set-aside procedure. Finally, we note that Senator Baucua letter referenced the Small ~usineas Act's requirement that small businesses "... shall have the maximum practical opportunity to participate in the performance of contracts let by any federal agency ..." 15 U.S.C. 637(a). However, this section is not applicable to the award of a federal contract, but to insure that small business receive subcontracts under prime contracts the government has already awarded. Raymond J. Wyrsch © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.

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1988 WL 227932 (Comp. Gen.), B- 230,556 (Cite as: 19S8 W]3 227932 (Comp. Gen.))

Senior Attorney,

OCG

ENI Senator Baucus' request stemmed from a specific DFSC fuel acquisition in which one small business firth, the Wolf Point Kefining Company, could not meet the offered "match price" for the delivery of JP-4 fuel to the Minor Air Force Base, because to do so would have resulted in a $900,000 loss to the company. The attorney representing the company balieves ~hat DFSC's small business set-aside procedure offers little opportunity for small businesses to compete against large firms. In view of the Senator's request for a general assessment of DFSC's procedure, and that Wolf Point did not file a bid protest concerning the Minot fuel acquisition, we will not addreas this case. FN2 The Small Business Act also requires that the head of each agency shall establish goals for the participation by small business concerns in the award of its procurement contracts having a value of $25,000 or more, 15 U.S.C. 644(g]. FN3 The DFAR also requires that similar clauses be inserted in DOD contracts,

i.e,, DFAK 52.219-7003. 1988 WL 227932 (Comp. Gen.), B- 230,556 END OF DOCUMENT

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Thomson~West.

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GovT.

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IN THE UNITED STATES COURT OF FEDERAL CLAIMS SUNOCO,INC., and PUERTO RICO SUN OIL COMPANY, Plaintiffs, v. THE UNITED STATES, Defendant. )

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)

)
)

)
)

)
)

)
)

No. 02-466C (Judge Block)

)
)

DECLARATION OF LAWRENCEC. ERVIN 1. Myname LawrenceC. Etwin and I aan the Chief of the Office of Market is Research, Defense Energy Support Center (DESC).I have held that position since January 2002. FromJanuary 1995 to January 2002, I was in charge of DESC's Office of 1 MarketResearch in its various organizational locations. I joined the Office of Market Research aa~d Analysis in September, 1980, as an analyst, and was employedas an analyst until I was appointed acting director. I was awardeda B.A. in Economics in 1975, and a M.S. in Ag-ficultural and Resource Economics 1980, both from the in University of MaryIand. 2. I have reviewed the January 17, 2006 study by Joseph P. Katt and Peter Killen submitted in this case. At paragraphs34-43 of their study, the authors criticize the tbrmula used in the Petroleum Mm'ketingMonthly(PMM)-based reference price for JP-4

t For a period of time, the office waskaao,,vn as the Office of MarketResearchand Competition.

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jet ft~el. JP-4 jet fuel is a naphtha-based product that also contains product from the keroseneportion of the barrel. 3. The PMM does not publish a price fbr JP-4 or for naphtha. Naphtha is an intermediate product that can, among other things, be blended into JP-4, or f~arther upgraded for inclusion into gasoline. The PMM publish prices for gasoline. does Because naphtha is a blending componentof JP-4 and an intermediate product in the manufactureof gasoline, the price of gasoline is a proxy for the value of the naphtha componentof JP-4. 4. The PMM formula relied on kerosene-based jet fuel for the kerosene component the JP-4 blend. DESC of selected kerosene-basedjet fuel because it is, by far, the largest volumekerosene type product. 5. Refiners used varying amountsof naphtha and kerosene to blend into JP-4. The 70-30 blend used in the PMM-based clause is within the range of howrefiners producedJP-4. I do not recall any of our suppliers questioning the 70-30 fommla that we used. 6. Prior to DESC'sdecision to use a common economicprice adjustment (EPA) clause, DESC allowed suppliers to propose their ownEPAclause. In manycases, suppliers of JP-4 proposed an EPA clause based, in part, on gasoline prices. I have attached two examplesm,o this declaration. In the first example, Ashland Petroleum -~, Company, Contract DLA600-81-D-0354 page 8, proposed the use of its ownsales prices for gasoline and kerosene in a 60 percent - 40 percent ratio. In the second

~ TheAshlandcontract is the subject of the sane type ofclainq filed by Flint Hitis. Marathon Ashland Petroleum,_~LCv. United States, Fed. C1. No. 02-1218C. The contract is part of the claim submission.

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example, Gulf Oil Co., Contract DLA600-81-D-04453, 8, proposed the use of its page ownsales prices for gasoline and jet fuel in a 50 percent - 50 percent ratio.

3 The Gulf Oil contract was Exhibit A of a November 2003, filing by plaintiff in Flint 3, Hills Resources, .LP v. United States, Fed C1. No. 02-0462C. ~

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I declare under penalty of perjury under the laws of the United States of America that the fbregoingis true and correct. Executed on

LAWRENCEC. ERVIN