Factor influences on the propane prices. Are propane prices expected to rise?
Propane is created from natural gas processing and crude oil refining, but the main influence on prices comes from crude oil prices as most of the propane’s competitive products are derived from crude oil.
Transporting propane over land also costs money, which is why people near the Midwest and Gulf Coast, the main suppliers, pay less than people in other regions.
During the year when winters are colder than usual, propane prices often rise because imports are the only available supply. Imports are sometimes delayed in arrival and propane retailers have to reduce their inventories, driving prices up.
Domestic production and inventory levels are two other factors that deal with supply and demand that make prices fluctuate. Propane production is not a seasonal phenomenon, but consumption is what makes winter prices generally higher than summer prices.
So let’s see what other factors will affect the propane prices and whether the price of propane is expected to rise or fall in the near term.
Applications of propane to humans:
- Propane is widely used in various high-end recreational activities including yachts, recreational vehicles, hot air ballooning, and camping.
- Industry players use Propane for a multitude of different processes including boilers, furnaces, ovens, and forklifts.
- Agricultural heating applications of propane: Greenhouse reclamation, production, drying and heating applications, hot water supply for dairy plants, watering pumps, and animal containers.
- There are also many other highly regarded Propane applications including power generation and hospitality industry uses.
- Almost all applications of propane involve the use of gaseous vapors rather than the use of liquefied petroleum gas.
What factors affect the price of Propane.
- Many factors influence propane price movements – namely high demand and depletion of supply reserves. We have all contributed to the “supply and demand” that drives the market.
4 factors that affect the propane prices
Global conflicts and natural disasters affect propane prices.
When wars, political conflicts, conflicts, or natural disasters such as tsunamis, earthquakes, or hurricanes occur in other parts of the world, this affects the export of crude oil – which is utilized in producing “greener”, more environmentally friendly fuels – from major oil-producing countries.
The United States, on the other hand, is a major exporter of propane, and the export business continues to grow. This is good business for large wholesale propane suppliers, but it increases demand even further in an industry that traditionally does not store large quantities of propane at once. Many propane suppliers are obligated to supply even less propane that they have committed to export than stockpiles of propane for domestic consumption.
Severe weather disasters affect propane prices.
As exports to the US slowed down due to global volatility, our propane supply was reduced. If this reduction in supply occurs during times of high demand, such as colder months, and even more scarce market will develop. When the cold is particularly severe or lasts longer than usual, the scarcity increases further. And it’s not just cold temperatures that can increase demand for propane. Heavy rains during the agricultural season produce bountiful crops that need to be dried quickly in large quantities.
The same is true for expected or predicted weather – even if a storm or temperature drop never fully materializes or isn’t as bad as feared. The fact of the matter is: that fuel has already been purchased, causing high demand. The high price itself can cause more panic buying, fearing that the price will continue to rise.
Who will benefit from the increase in propane prices?
Whatever the cause of the propane scramble – causing the massive price hike – local propane suppliers are not benefiting. Large wholesale propane suppliers are often confused with local energy suppliers, but propane businesses that serve customers directly are not the cause of the price increases and they do not benefit from them either.