FERC Sets New Oil Pipeline Rate Index Through 2031
The Federal Energy Regulatory Commission has concluded its five-year review of the oil pipeline rate index and established a new formula for determining annual changes to pipeline rate ceilings. Effective July 1, 2026, the index will be set at the Producer Price Index for Finished Goods minus 0.55% (PPI-FG-0.55%) for the five-year period through 2031. This affects regulated oil pipeline operators and shippers relying on these services.
Photo: Joshua Brown / Pexels# FERC Sets New Oil Pipeline Rate Index Through 2031
The Federal Energy Regulatory Commission (FERC) has issued a Final Order concluding its five-year review of the index level used to determine annual changes to oil pipeline rate ceilings, effective July 1, 2026.
Index Formula Established
According to the FERC order, "The Commission establishes an index level of Producer Price Index for Finished Goods minus 0.55% (PPI-FG-0.55%) for the five-year period beginning July 1, 2026." This formula will govern how pipeline rate ceilings are adjusted annually over the next five years.
The Producer Price Index for Finished Goods (PPI-FG) tracks price changes in finished goods at the producer level and serves as the baseline for this rate adjustment mechanism. The negative 0.55% adjustment represents the Commission's determination of appropriate rate modifications for the review period.
Who This Affects
This decision impacts regulated oil pipeline operators subject to FERC jurisdiction and the shippers who rely on these pipelines for crude oil and refined product transportation. Pipeline companies will use this index formula to determine their allowable rate increases for each year of the five-year period. Shippers should expect their pipeline transportation costs to fluctuate in correlation with finished goods price movements, adjusted by the Commission's established offset.
Five-Year Review Process
The FERC conducts these index reviews every five years to ensure that the rate adjustment mechanisms remain appropriate and efficient. These periodic reviews allow the Commission to evaluate whether the existing index levels and adjustment factors continue to serve the public interest and provide reasonable rates for both pipeline operators and shippers.
The new index level replaces the previous five-year formula and will remain in effect until the next comprehensive review cycle concludes.
What this means for shippers
Oil and refined product shippers should understand how this index adjustment will influence their landed cost calculations. Pipeline transportation rates form a significant component of total landed costs for bulk liquid shipments. With the new PPI-FG-0.55% index now in effect, shippers can better forecast their cost structures and budget for pipeline transportation expenses through 2031. Monitoring PPI-FG data releases from the Bureau of Labor Statistics will help shippers anticipate rate changes under this formula.
