Propane prices can
fluctuate quite a bit. This article will discuss the basic reasons why propane gas prices move
and what to look for to anticipate price moves.
Propane
prices change based on several factors. It can be influenced by the simple
supply and demand of fueling barbecue grills, producing petrochemicals and
using propane for transportation fuel. Prices are depend on the distance
propane has to travel to your market, the amount used by a customer and
competing fuels.
Factors
that influence propane prices:
Crude
oil and Natural gas prices. Propane gas is a by-product of crude oil refining
and natural gas processing. Propane prices generally mirror the price movement
of crude oil, since it mostly competes with crude oil based fuels.
Basic
supply and demand.
While
propane production is not seasonal, the demand for it is. There is usually a
build up of inventories during the summer months when demand is low. Depending
on the winter weather, inventories can be drawn down to meet the heating
demands of winter. If it is a very cold winter, it can put a huge demand on
supplies and will having to import supplies. Importing propane from foreign
sources can take several weeks
Location
of supply.
Most propane is produced in the Midwest, hence making current propane prices higher
on both coasts due to shipping. There are no propane pipelines to ship propane
to various states like you can with crude oil. So to the further propane needs
to be shipped, the more expensive it will be.
Markets
that need propane.
Demand
for propane comes from the residential markets (heating, and such) and the
commercial sectors which need propane to produce petrochemicals and the
agricultural sector uses propane to dry harvested crops. The commercial sector
has a little more flexibility in whether to use propane or other fuels. In the
winter, residential propane use increases. The commercial sector anticipates that
every year and is positioned to use an alternative fuel so as not to compete
for propane.
Now
you have a quick look as to why propane prices fluctuate.
