Propane Prices - What Influences Costs
Propane prices appear to be clear, but really, it is not. Purchasers who want to enjoy propane's affordable and clean energy actually pay more for more than just the propane itself and other factors into the overall price.
Learn about the different factors that affect the price of propane in this article. And find out if you could actually save more on propane in this article.
Calculate Propane Prices per Gallon
It seems that getting the exact cost of propane is just simple mathematics. Still, there are actually a lot of factors that play into the pricing. Demand, transportation costs, weather and production volume are just some factors that play a big part in propane pricing.
Natural Gas Prices
During the refining process of crude oil and natural gas, gases are left behind, and that is how propane is produced. In the United States, about 70 percent of propane comes from natural gas. This is why the price of natural gas can affect the cost of propane.
Competitors of propane use crude oil by-products, so the price of crude oil plays a significant role in propane cost.
Supply and Demand
Just like any other fuel, the demand for propane can directly affect the cost of propane tanks. This factor is spread out across the country, which means if there is a massive demand in the midwest, the northeast's propane prices will also increase even if there is no high demand in the northeast. If there is a low demand for propane, then it could also result to lower prices.
As a propane user, it is a good practice to pay attention to the ups and downs of supply and demand so you can monitor the propane prices well.
Weather
Since propane is commonly used as cooling and heating fuel in many homes, the weather can directly affect the prices nationwide because it is a big part of supply and demand. Cold weather in the north can increase the demand for propane, so most likely, it will affect the demand for propane in warmer parts of the country. Prone suppliers try to keep the price at a base level to accommodate the fluctuations in prices. However, there are still unexpected factors that can change propane prices.
Proximity of Supply
The most extensive propane storage facilities in the United States can be found in Texas and Kansas. So if you live close to these places, you most likely get propane for lower prices compared to people who live from the storage hubs.
Propane gas is trucked and transported to a local hub in specialized tankers. This is why longer distances can lead to increased transportation costs. The distance between regional storage hubs and delivery location can also affect the cost of propane.
The demand for propane in the northern parts of the country is higher because it is colder, making the propane more expensive.
Production and Export
As we have mentioned above, propane is a by-product of natural gas and crude oil. This is why the amount of propane that can be manufactured is limited by the amount of natural gas processed and the amount of crude oil refined. Reduction in the volume of crude oil and natural gas can reduce the amount of propane produced, which can cause the price increase of crude oil.
Exportation of propane to other countries can also affect the supply and cost of propane.
Other Costs of Propane Production
While propane's price per gallon is a lot cheaper than the cost of other fuels, there are still other factors to check when considering whether to switch to propane. In most cases, the propane company will give you a free tank as long as you use it for maintenance and supply. But some companies charge a leasing fee every month. These costs depend on the size of the tank and can vary regionally.
Here are some of the most common additional costs you need to take into consideration:
- Site preparation
- Installation of the tank
- Meter installation
- Line setting and trenching
- Permits
Final Words
It will all boil down to one question: Do you really need propane? Propane is a versatile fuel. You can use it to fuel stoves, furnaces, ovens, water heaters and dryers. It is an excellent option for people who do not have a connection to municipal natural gas lines. Propane can also be used to fuel light-duty fleet and heavy-duty vehicles because it is clean-burning.
