What Impacts the Cost of Propane?

What Impacts the Cost of Propane?

Have you ever wondered what impacts the cost of propane? The basic principles of supply and demand certainly play a role, but there are a variety of other factors that influence the price the end consumer will pay for this commodity. We’ve listed out just a few considerations below that will likely impact your energy provider and in turn the price you’re paying per gallon.

1. The supply of crude oil and natural gas– It is important to remember that propane is not harvested like other natural resources (i.e. lumber, coal, fresh water). In contrast, propane is a byproduct of the crude oil and natural gas refining process. This means its pricing is inherently impacted by the supply of both of these fuels and will fluctuate alongside these global markets.  
2. Supply and demand– This basic rule applies to pretty much all goods and services but the difference here is that the weather plays a very significant role. Long and cold winters will typically mean that households will burn larger quantities of propane to satisfy heating needs. As a result, more deliveries will be required, and the overall demand will increase. These are the scenarios where locking in your fuel rate at the onset of a heating season will pay dividends. Those who do not lock in their rate will be at the mercy of the fluctuating market price. Further, if these individuals are not enrolled in an automatic delivery schedule there is no guarantee that their provider will be able to accommodate their order in instances of especially high demand. 
3. Volume of U.S. Propane Export- According to the U.S. Energy Information Administration, the U.S. has exported millions of barrels of propane per day in the first half of 2020 (U.S. Energy Information Administration, 2020). These exports are primarily destined for Asian countries. The volume of propane exported will in turn impact the amount of product available domestically. 

So, if all that is true, why does pricing vary from one provider to the next? Here are a few of the most prevalent reasons: 

• Storage Capabilities- At Aero Energy we purchase our fuel in bulk so we can pass as much savings onto our customers as we possibly can. This also provides our customers with security when demand is at its highest. 
• Hidden Fees- If you call around to compare propane prices between companies it is always important to ask if there are any additional fees associated with a delivery. If the price per gallon you’re being quoted sounds too good to be true it very well might be offset by additional fees.
• Incentive Programs-  Many companies (including Aero Energy) offer price incentives based on long-term contracts and the quantity of propane being delivered. 

You can rest assured knowing that we maintain relationships with numerous suppliers and always buys in bulk to ensure our customers are always getting a competitive rate. Give us a call at 1-800-998-4311 if you ever have questions about the price you are paying with us or a different provider. We are always happy to serve as both a sound board and resource in the energy industry. 

References:
United States Energy Information Administration. (2020). U.S. Weekly Exports of Propane and Propylene. Retrieved from https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W_EPLLPZ_EEX_NUS-Z00_MBBLD&f=W