Throughout the years, the price of propane has fluctuated quite a bit. From 1990 to 2020, the price has largely doubled from $1 to $2 per gallon. However, propane has seen greater average prices in the years leading up to now such as the winter of 2014 high point of $3.69 per gallon. But what factors cause these prices to shift, and what can propane enthusiasts look to to estimate their future expenses?
There are a variety of answers to this question, but probably the most obvious day-to-day factor comes from the fluctuation of temperatures throughout the seasons. Seasonal changes can shift prices around 20 cents which can be a big difference if you’re buying in bulk. Due to propane’s application for heating homes, supply can often dip in the colder months, which often means an increased price. Consumers can expect to get the best short-term deals in the warmer months when supply is high and consumers aren’t in dire need.
The power of supply and demand doesn’t stop there though. In the broader sense, it’s important to keep an eye on industries that rely on propane such as farming, heating, public transportation, and petrochemical production in addition to any new propane-fueled industries or fads that may pop up. If an industry is struggling, growing, or innovating in your state or local area, it may be safe to assume that there will be a price adjustment to match. It can take some research, but you can often see fluctuations based on these factors. Figuring out the pattern just right can help consumers pin down the best times to buy in bulk. A third important factor is the distance the propane travels to reach it’s retailer. Location is an important factor with any product, so it can be smart to shop around and compare prices for different regions and retailers. When buying propane in bulk, shipping will often be an add on to the price tag, so balancing out a low upfront cost and transportation cost can lead consumers to the optimal price for their area.
Another important aspect is the materials used to produce propane. In contrast to what most might assume, gas and oil prices are not the best indicators of the cost of propane in today’s market. Although propane has been regularly extracted from crude oil since it’s cultivation, the quickly advancing natural gas market has been creating processes that no longer require crude oil extraction to obtain propane. As of now, the production of propane is largely split evenly between the two methods, so it actually follows both industries. However, even if propane were strictly developed from extracting natural gas, this would not be a perfect correlation either, as there are many other factors that separate the retail of natural gas and propane such as the cost to produce, transport, and store each substance. Unlike propane, natural gas often requires cooling to optimize it’s space effectiveness during transportation. On the other hand, natural gas can also be directly linked to multiple locations with gas line systems, so the technology necessary to make either work can distort the cost relationship between natural gas and it’s propane extract. So, it is important to not only monitor natural gas activity in your area, but also the technological costs, materials, and advancements that allow each product to function and reach its consumer.
It is ill-advised to wait until the last minute to refill propane tanks as you may get stuck with a less than favorable price tag in the middle of the winter. Keep an eye on these important factors if you’re in the market for stocking up. Whether your propane use case is residential or industrial, nailing that good deal can save you a bundle down the road.