The price of propane is rising, but what is the reason for this? Could it be the cold weather? There are many different factors that affect propane prices, so sometimes it is difficult to determine the cause when prices rise. Some of the factors that can influence propane prices are the cost of transporting the fuel, the amount of propane produced during the year and even the weather. Propane has many uses, from home heating to barbecue grills that are used only in the summer. Many people use propane to heat their RVs when they go camping. All of these people are affected when propane prices rise. Sometimes the change in cost is related to the cost of other fuels that are also used to provide heat. At other times, the cost increase can be attributed to the cost of transporting fuel from one location to another. Propane depends on both the processing of natural gas and the refinement of crude oil for production, so naturally the cost of both of those raw materials influence the cost of propane.
What affects the price of propane?
The price of propane is usually affected more by crude oil prices than by the price of natural gas because these two fuels are often in competition with one another. Of course, the principles of supply and demand also affect prices, not just on propane but also on everything that is bought or sold. Whenever there is an extremely cold winter, more propane is needed for heat and the demand rises, which causes propane prices to rise as well. Since propane is made throughout the year, there is typically a lot available during the summer and it gets used up through the winter months. If there is not enough propane to keep up with the demand, propane must be imported from other countries, which increases the price even more. Sometimes a period of cold weather during the fall will drain the propane reserves, which can lead to a low supply by the end of the winter unless there is milder than normal weather during the winter to make up for it. Cold weather that drags on for longer than usual can also deplete stores of propane and lead to a shortage and increased prices.
Distance from supplier to user matter too
Another factor that influences propane gas prices is the distance the propane must be transported to reach its final destination. It costs money to ship propane from one part of the country to another by truck. Since most propane comes from the Midwest and Texas, states that are the furthest away from these areas will usually experience the highest propane prices. About half of all the propane used in the United States is consumed by the petrochemical industry. However, this industry is able to switch between different types of fuel as needed, so when the supply of propane is low, crude oil or natural gas can be used instead.
You can learn more about propane prices visiting IntegrityEnergy.com