Federal Energy Administration's System for Monitoring Heating Oil Prices

EMD-77-63A: Published: Aug 25, 1977. Publicly Released: Aug 25, 1977.

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Under the monitoring system established by the Federal Energy Administration (FEA) to ensure that heating oil price levels remain reasonable, FEA collects price information from a survey of about 600 firms and compares the average of these survey prices to an index price which is the FEA best estimate of what average heating oil prices would have been had they remained under price controls.

Overall, the sampling plan is reasonable and fairly represents residential heating oil users. The design of FEA regional and national monitoring systems is sufficiently sensitive to increases in residential prices so that a similar monitoring system designed specifically for residential heating oil prices is not necessary. Survey and sampling errors are reasonably small, and sampling errors have been insignificant for the past heating season.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Administrator, FEA, should: (1) conduct periodic test surveys of heating oil firms which are outside the FEA present sample but within its sampling frame to determine if these firms reflect higher prices because they are not constrained by the requirement of submitting monthly price reports to FEA; (2) continue its weekly monitoring system and include nonresidential prices as well as residential prices; (3) reevaluate the appropriateness of a full two-cent flexibility factor and provide an analytical justification for whatever flexibility factor value it determines appropriate; (4) examine the feasibility of using FEA yearly data instead of the adjusted 1975 Bureau of Mines data to calculate survey and index prices; and (5) reevaluate its heating oil price monitoring system in terms of the blending of fuel oil and, if necessary, make adjustments to the index formula to account for the impact of blending.

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