Why Have Propane Prices Gone Up?
Written on: April 20, 2022
Understanding the Propane Gas Markets & Price Fluctuations
Propane is one of the most cost-efficient ways to fuel commercial and industrial businesses. That remains true, even when propane prices are increasing. Those higher prices are challenging. At Georgia Gas Distributors, we know this all too well. Propane providers don’t actually make more money when prices increase, though this is a common misconception. Fortunately, historical trends have shown us that, when it comes to prices, what goes up must come down. It’s just a matter of when. For all of us in and around Atlanta, the feeling is, the sooner the better.
Propane Price Swings Are More Moderate than Oil
You may have noticed price swing trends with propane tend to be more moderate compared to heating oil, gasoline and other fuels derived from a barrel of crude oil. This is because propane is a completely domestic form of energy. The U.S. actually exports about twice as much propane to the rest of the world than we use in our own country. Even though propane still is priced in the world market like oil is, this abundance of domestic North American supply gives us supply security and helps moderate the pricing in the U.S.
Factors That Influence Price
- Supply and demand drives higher propane prices. As an example, global demand for propane has risen because of its increased use as a petrochemical feedstock, which serves as the basis of many end products, including plastic, paper, adhesives and detergents. Global demand for U.S. propane has remained steady despite higher U.S. prices because international prices for propane and other feedstocks also have increased, according to the Energy Information Administration.
- Global conflicts and natural disasters impact crude oil and natural gas prices. Since propane is a by-product of both crude oil and natural gas their price increases affect the price of propane. This is true for the war in Ukraine, and is further compounded by the fact that Russia carries clout because it is the third-largest petroleum and liquid fuels producer in the world. On top of that, sanctions against the Russian energy sector add to market volatility because there could be a big energy void to fill.
- Growing export demand is good business for the large wholesale propane suppliers, but it increases demand even further in an industry that traditionally doesn’t store huge quantities of propane at one time. When propane suppliers are committed to export certain quantities, it leaves even less of propane inventory for domestic consumption.
- Weather extremes can compound supply scarcity due to panic buying, as well as increasing demand, such as when heavy rains create bumper crops that need to be dried rapidly, using propane.
- Long-time factors that always have influenced price fluctuations include proximity of supply, transportation bottlenecks, energy policy, the cost of delivering fuel and manufacturing trends.
- New expenses have occurred because of COVID-19 related workforce issues and supply chain problems.
What’s in store for propane prices next?
We don’t know where things will go from here. One thing we can tell you is that we are just as concerned as you are. One thing you can count on when you become a customer is that we will never let you run out. We have been in business for 65 years and have very strong relationships with suppliers and financial institutions. From forklifts – to – fleets and hospitals – to – hospitality, Georgia Gas Distributors offers a smart, economical approach to fueling your commercial operation.
Nothing will make us happier than when prices start dropping. Until then, trust us to look out for your company’s propane needs.
