Propane Prices, What Influences Them?
Propane prices are unique in that they are influenced from a variety of sources.
On the one hand prices will reflect the price movements of crude oil prices and of natural gas prices since propane is used to power vehicles and to provide heat to homes and businesses.
Propane is also used for things such as fueling your barbecue grills to being used by the petrochemical industry.
Another use of propane it is used in the drying of corn and other grains after a harvest, depending on there moisture content.
Propane is not drill or recovered on it own.
It is a by-product of recovering crude oil ad natural gas.
Generally speaking, propane tends to track the price movement of crude oil prices since it mostly competes with crude oil-based fuels.
What are the factors that effect prices? As with any commodity, supply and demand will have a major effect on prices.
The supply depends on production, weather and of course inventory.
If you have a situation like a hurricane, this not only shuts down natural gas and crude oil production, but will also shut down propane production.
Propane production is not seasonal; it is produced all year round.
The problem is that demand is seasonal.
During the summer months there is not much demand for propane from residential users and therefore inventory supplies can increase.
However, most of the demand for propane comes in the winter months.
If there is a bad summer in which inventories don't increase, then supplies will be low for the coming winter.
This plus if it is a colder than normal winter, look for propane prices to increase.
The price will increase because the only available source for more propane would be from foreign imports.
These imports would take several weeks to get here; hence the price of propane will be rapidly bid up.
The earlier in the winter that it is colder (increasing demand) the more susceptible propane prices will rise.
Prices are general cheaper in the gulf coast and the Midwest.
Prices for propane are typically set from the Mont Belvieu Texas.
Due to transportation costs, those markets further away from that area will pay higher prices.
As stated earlier, propane is in demand from several markets.
In the winter, home use of propane tends to increase.
This increase will depend on the weather.
The petrochemical markets use propane, but are able to be more flexible in choosing what fuels to use.
They can readily switch between fuels depending on which one is cheaper at the time.
A third sector, agriculture can also create higher demand for propane if it is needed to dry the crops.
Now you know what will influence propane prices this coming season.
On the one hand prices will reflect the price movements of crude oil prices and of natural gas prices since propane is used to power vehicles and to provide heat to homes and businesses.
Propane is also used for things such as fueling your barbecue grills to being used by the petrochemical industry.
Another use of propane it is used in the drying of corn and other grains after a harvest, depending on there moisture content.
Propane is not drill or recovered on it own.
It is a by-product of recovering crude oil ad natural gas.
Generally speaking, propane tends to track the price movement of crude oil prices since it mostly competes with crude oil-based fuels.
What are the factors that effect prices? As with any commodity, supply and demand will have a major effect on prices.
The supply depends on production, weather and of course inventory.
If you have a situation like a hurricane, this not only shuts down natural gas and crude oil production, but will also shut down propane production.
Propane production is not seasonal; it is produced all year round.
The problem is that demand is seasonal.
During the summer months there is not much demand for propane from residential users and therefore inventory supplies can increase.
However, most of the demand for propane comes in the winter months.
If there is a bad summer in which inventories don't increase, then supplies will be low for the coming winter.
This plus if it is a colder than normal winter, look for propane prices to increase.
The price will increase because the only available source for more propane would be from foreign imports.
These imports would take several weeks to get here; hence the price of propane will be rapidly bid up.
The earlier in the winter that it is colder (increasing demand) the more susceptible propane prices will rise.
Prices are general cheaper in the gulf coast and the Midwest.
Prices for propane are typically set from the Mont Belvieu Texas.
Due to transportation costs, those markets further away from that area will pay higher prices.
As stated earlier, propane is in demand from several markets.
In the winter, home use of propane tends to increase.
This increase will depend on the weather.
The petrochemical markets use propane, but are able to be more flexible in choosing what fuels to use.
They can readily switch between fuels depending on which one is cheaper at the time.
A third sector, agriculture can also create higher demand for propane if it is needed to dry the crops.
Now you know what will influence propane prices this coming season.
