Costs price indices

Contrac tors bids offer the most rehable information on cost. Order-of-magnitude costs, however, may be required for preliminary studies. One way of estimating them is to obtain cost information from similar facihties and scale it to the proposed installation. Costs of steel storage tanks and vessels have been found to vaiy approximately as the 0.6 to 0.7 power of their weight [see Happel, Chemical Process Economics, Wiley, 1958, p. 267 also Williams, Chem. Eng., 54(12), 124 (1947)]. AU estimates cased on the costs of existing eqiiipment must be corrected for changes in the price index from the date when the equipment was built. Considerable uncertainty is involved in adjusting data more than a few years old. 

Costs converted to US doiiars (1996 vaiue) using the Heaith Purchasing Power Parity price index (OECD, 1999). 

If it can be assumed that world market forces will level out the prices of equipment, the UK price can be estimated from the US price by bringing the cost up to date using a suitable US price index, converting to pounds sterling at the current rate of exchange, and adding an allowance for freight and duty. 

Labor costs experience inflation just as do capital costs as Figure B.5 demonstrates. Raw materials and fuel costs are subject to considerable erratic fluctuations as demonstrated by oil and metals prices, which have rapidly risen and fallen several times over the last five decades. For example, Figure B.6 shows the changes in refinery fuel price index since 1955. Prediction of refinery fuel prices in the future is clearly much more difficult than predicting capital costs. 

Consumers contributions to the cost of their medicines are limited by safety net thresholds, which are adjusted annually in relation to the consumer price index (CPI). Under the PBS the maximum cost for a listed item on 1 January 2005 is AUD 4.60 for concessional patients and AUD 28.60 for general patients, except where... 

The effect of plant capacity on investment can be seen from Fig. 8.2-3. Costs of around 245 million DM, or only 817 DM/t on the 1997 basis, are required for plants equipped with maximum-stream-size reactors of 300,000 t/a. The data can be extrapolated to actual (1998) costs by means of the price index of 1.01 published in [1], These plants with large design capacities have significantly reduced specific investment costs. 

Scale up the individual O M costs using indexes. Each of the O M costs is escalated via the same formula, but by using a different index. The index to use for each cost is a Producer Price Index (PPI), compiled and published by the U.S. Department of Labor s Bureau of Labor Statistics [Ref. 5], The PPI index numbers, names, and average 1998 and 2001 values used are as follows ... 

Escalate this cost to 2001 dollars via the Producer Price Index for plastic pipe (pcu3084 l). The annual index values for 1993 and 2001 are 98.2 and 101.0, respectively. Then... 

To escalate this cost to 2001 dollars, use the Producer Price Index for centrifugal fans and blowers (pcu3564 3). Index values for 1988 and 2001 are 106.8 and 151.1, respectively. 

Figure 6.15. Damage cost estimates per ton of NOx emission. Best estimates or geometric average of upper and lower bound estimates, inflated to 2001 based on Consumer Price Index.

This value disagrees with Wiggins estimate, 144 million in1990 dollars, As discussed by Woltman (524) and DiMasi et al. (109), Wiggins made an error in calculating the total capitalized cost. OTA S re-estimate, 123.4 million, is slightly lower than DiMasi s recalculation, 124.7 million in 1990 dollars, because of differences in price indexes used. 

Since direct plant costs are always estimated for some date in the future, it is necessary to determine the effect of increases in price. Use is therefore made of price indexes which are published for chemical plants in the individual countries (Table 6.1-2). The price index i determined by extrapolation is divided by the index Iq at the date of the cost determination. The ratio i/io is then a measure of the increase in investment costs to be expected. 

While the CPI is very popular, it is not the only price index available to those in need of estimating inflation for a specific service or commodity. The Bureau of Labor Statistics publishes a number of price indexes that may or may not influence the CPI (Standard Poor s Statistical Service 1999). To provide some semblance of the range of available data, the Bureau of Labor Statistics provides producer price indexes for selected lumber, including hardwoods, southern pine, oak, softwoods, and Douglas fir. Breakdowns to such fine detail are available for a variety of commodities. Indexes are also available for industry trade groups to provide information for specific estimates, such as construction costs and machinery. 

Figure 16.1 compares, on a semilogarithmic plot, the values of the CE Plant Cost Index, MS Process Industries Average Cost Index, NF Refinery Cost Index, and ENR Construction Cost index for the period of 1975 to 2000. The same values are tabulated in Table 16.6. It can be seen that costs increased at a more rapid aimual rate from 1975 to 1981 than from 1981 to 2000. In the latter 19-year period, the cost indexes have increased by factors of 1.327 for CE, 1.480 for MS, 1.707 for NF, and 1.755 for ENR. These factors correspond to the following respective increases per year 1.50%, 2.08%, 2.85%, and 3.00%. Included in Figure 16.1 and Table 16.6 are values for the U.S. Consumer Price Index (CPI), published by the... 

The historic effect of inflation on costs was seen in Chapter 16 in Table 16.6, where four cost indexes and the consumer price index (CPI) were compared. From that table, the following average annual inflation rates, shown in Table 17.11, are obtained for the 10-yr periods of 1980-1990 and 1990-2000. Also included in the table below are the average annual hourly wage increases. In the period of 1980-1990, the average hourly labor wage rate in the United States increased from 6.66 to 10.01, while for 1990-2000 the increase was from 10.01 to 13.67. 

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