What are the reasons that affect Price of Propane?

Posted by Rita H Peterson on September 12th, 2018

The most common question that the propane dealer ever answers is “what’s the price of propane?” However, the propane tank purchase prices are bit more complex than just a dollar figure measured in a gallon. The propane prices can be fluctuating greatly depending on the unforeseen economic, political, climate and other factors. You may be thinking all the propane companies are for profit business, but that’s wrong they are not always in a profitable position.

Why do propane prices increase?

There is no ready source of increase the production of propane when supplies run low, because propane is produced by refineries and gas processing plants at a fairly steady rate year-round. The over increase price are typically due to a dwindling supply, which drives up cost for both wholesalers and retailers. When demands runs high and supplies run low, increase in price affect everyone from the wholesalers to the retailers to the consumers.

Factors that affect the price of propane:-

Crude Oil and Natural Gas price

When you notice that price per barrel of crude oil begins to drop, you will also see the lowered prices of gas pump after it. But what about the propane tank? Propane is after all is produced from crude oil refineries. Propane tank rental are mostly found in residential areas. And crude oil largely influences the price of residential propane. So, if the price of the crude oil drops, you may save few dollars for a short term

Supply and Demand

I am sure you all have studied about the supply and demand rule, the demand against the available supply, affects the cost of the product. During the summer, when the heating system is in a break, you may notice the cost of the propane is lowering. But in the winter more homeowners require propane tank refill.  And for such demand the price will increase.

Proximity of supply

The proximity of your propane supply plays a crucial role in determining the cost of propane tank purchase. The closer you live to a main distribution point of propane, the less average your cost will be. Direct delivery from the refineries involves a longer route to reach the consumer. The transportation cost increase or decrease the overall cost of propane purchase.

Market need

As we all know winter is when use tends to increase for the entire residential customer, the market need also influence the propane costs. As the supply demand formula goes, the customer will also pay higher price for propane as the need is most in winters. And in this time the propane fuelled vehicles and machinery are more in demands

How you can be benefited?

People who are mostly rely on propane for heating furnace; you will have the greatest benefit. Since your use of propane is limited in winter months, you can easily figure out the propane prices throughout the summer months. You can also do a thing you can check with your provider to see if they offer a way to lock in the prices. If you can and you can fill up your tank when the prices are low.

Your actual savings may vary significantly upon many factors so this is a guide to aware of what causes propane price fluctuations. You may also call around to your local providers in order to secure the best price.