Cylinders & price
What goes into the price of propane, and why full-service dealers differ
The price of delivered propane is built from the wholesale cost of the fuel, the cost of moving it to local storage, the cost of storing it and trucking it to your tank, and the services the dealer provides, and seasonal demand moves all of those. A full-service dealer's price also covers trained technicians, safety checks and around-the-clock availability, so it reflects more than the gallons alone.
Updated · American River Gas office, Newcastle
1. The wholesale cost of the fuel
Propane comes from natural gas processing and crude oil refining. The U.S. Energy Information Administration (EIA) explains that propane prices relate to those sources and to supply and demand. Mont Belvieu, Texas is the U.S. trading hub EIA uses as the reference, and its spot price is the reference point for much of the wholesale market.
EIA also notes that since the United States became a net exporter, propane prices here are tied more closely to the international market, so world demand can move what a gallon costs in California.
2. Getting propane to the region
Propane travels by pipeline, rail and truck from producing areas to bulk storage terminals and distributors. EIA explains that consumers farthest from major supply sources generally pay more for delivered propane because of the added cost of moving it to bulk distributors and from there to individual customers, and that rail and water congestion in winter can push prices up.
3. Storage and the seasons
Propane production is fairly steady all year, but use is highly seasonal. EIA describes how inventories are built up in spring and summer and drawn down in fall and winter. Dealers also keep propane in their own bulk storage so they can serve customers through a cold spell. When cold weather arrives early or inventories run low, wholesale and retail prices can rise quickly.
4. Local delivery
Homes store propane in their own tanks, so it is delivered by truck in relatively small amounts. EIA notes that residential and commercial customers generally pay more per gallon than large buyers for exactly that reason, and that the unit price is generally lower when the volume delivered is larger. Delivery means trucks, fuel, insurance, driver training and time on the road, and foothill routes add steep driveways, long hoses, gates and winter weather.
5. Service and safety
This is where dealers differ most. A full-service dealer keeps trained service technicians on staff, performs leak tests and system checks, sets tanks and runs gas lines, converts appliances, and answers the phone after hours. At American River Gas, a member of our staff is available during business hours, and our answering service reaches staff after hours, on weekends and on holidays.
Those services carry costs, so a full-service price can differ from one for propane alone. Neither approach is wrong. You choose the level of service that suits your home.
Why prices vary from one dealer to another
EIA's guidance for consumers lists the factors that affect a heating fuel price: the volume delivered, the method and frequency of delivery, and the dealer's location relative to its supply and to the customer. Add the service a dealer includes, and prices can vary for honest reasons. When you compare, compare the whole package: delivery options, safety checks, emergency response and how problems are handled.
Taxes and published averages
If you look up propane prices on EIA's Heating Oil and Propane Update, keep in mind that those averages blend many dealers, delivery sizes and service levels across a whole state or region, and California is not one of the states in EIA's weekly residential propane price table. They are useful for seeing the direction of the market over a season, less so as a quote for a particular home on a particular road.
Ways to manage your propane costs
- Avoid running out. A run-out requires a pressure check before service resumes, with an extra charge, so call at about 30% or use Keep Full.
- Spread payments with the Budget Plan: 11 equal monthly payments plus a clean-up month, starting in May.
- Keep appliances maintained and use the most efficient equipment that fits your home.
Questions
Straight answers
What determines the price of propane?
The wholesale cost of the fuel, transportation to regional storage, storage, local truck delivery, the dealer's services, and seasonal demand, as the U.S. Energy Information Administration explains.
Why is propane more expensive in winter?
Use rises sharply in cold weather while production stays fairly steady, so inventories are drawn down and transport can be congested. That can push wholesale and retail prices up.
Why do propane prices differ between dealers?
Delivery volume and frequency, the dealer's distance from supply and from you, and the services included, such as technicians, safety checks and after-hours response, all affect the price.
What is Mont Belvieu?
The Texas trading hub EIA uses as the reference for U.S. wholesale propane prices.
Related
Keep reading
Sources: U.S. EIA: factors affecting propane prices (supply, seasons, transportation, delivery size) (opens in a new tab) · U.S. EIA: prices for hydrocarbon gas liquids (Mont Belvieu, crude oil and natural gas links) (opens in a new tab) · U.S. EIA: Heating Oil and Propane Update, FAQs for data users (opens in a new tab) · American River Gas: services, safety and FAQ (company practice) (opens in a new tab) · U.S. EIA: weekly residential propane prices by state (Heating Oil and Propane Update) (opens in a new tab)
Newcastle yard · since 1966
Questions about propane?
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After hours, weekends and holidays, our answering service reaches a staff member.
