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DOE methodology for determining diesel prices sees 2 key changes

Calculating volume at station, more outlets represent major shifts

Photo: Jim Allen/FreightWaves

The methodology change for producing the weekly average retail diesel price published each week by the Department of Energy has taken the survey base up to 590 outlets, according to a spokesman for the agency.

In response to a series of questions submitted by FreightWaves regarding the methodology shifts, Chris Higginbotham of the Energy Information Administration’s media relations team identified two major changes in how the weekly price, which is the basis for most fuel surcharges, is now calculated. The new methodology went into effect June 13.  

The previous survey was based on the reports from 403 outlets, Higginbotham said. 

The second significant alteration involves the weighting of volumes, which is necessary so the the price of a station selling large volumes of diesel will carry more weight in the final number than a smaller station.

According to Higginbotham, volume weighting in the past was based on data from another unspecified arm of the DOE or from the Federal Highway Administration. But under the new methodology, volume weighting is performed on the basis of the volume moved at the retail outlets reporting their prices to the EIA, he said. That data is reported by the outlet when it also reports the price, Higginbotham said. 

“Simply put, we only use EIA data to calculate our price averages now, which makes it easier for us to calculate the price estimates,” Higginbotham said in an email to FreightWaves.

Whether the changes have had a built-in tendency to increase or decrease prices compared to the previous methodology is difficult to discern, though early data suggests some overall rising in at least one key spread. 

Comparing the DOE/EIA average weekly retail diesel price to the daily price in the DTS.USA data feed in SONAR could be read as the new methodology leaning toward higher prices. 

That spread did shoot up significantly in July compared to where it was just prior to the change.

For example, in the nine weeks leading up to the change, the DOE/EIA price was less than the daily price posted Monday in DTS.USA for seven of those weeks, with the other two weeks seeing the DTS.USA price at a small premium.

But once the change was made, the spread started to move up significantly compared to the DTS.USA price, reaching as high as just under 20 cents for three consecutive weeks at the end of July and the start of August. More recently, that spread has been closer to parity, ranging from 2 cents to 9 cents in favor of the DOE/EIA price during the five weeks leading up to the price of Oct. 3.

“The purpose of updating our methodology for calculating the average diesel prices was to improve the accuracy of the diesel price estimates we publish,” Higginbotham said.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.