Propane Prices
Weekly propane prices
Source: Energy Information Administration (EIA)
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Propane prices occasionally spike, increasing disproportionately beyond that expected from
normal supply/demand fluctuations. The main cause appears to lie in the logistical difficulty of
obtaining resupply during the peak heating season. Because propane is produced at a relatively
steady rate year-round by refineries and gas processing plants, there is no ready source of
incremental production when supplies run low. Propane wholesalers and retailers are forced to
pay higher prices as propane markets are bid higher due to dwindling supply. Consequently, higher
propane prices are simply passed on to consumers. Imports do not offer much cushion for
unexpected demand increases or supply shortages due to the long travel time. On the other hand,
when propane prices do spike, the petrochemical sector may cut back on its use, thus freeing up
supplies for other uses.
normal supply/demand fluctuations. The main cause appears to lie in the logistical difficulty of
obtaining resupply during the peak heating season. Because propane is produced at a relatively
steady rate year-round by refineries and gas processing plants, there is no ready source of
incremental production when supplies run low. Propane wholesalers and retailers are forced to
pay higher prices as propane markets are bid higher due to dwindling supply. Consequently, higher
propane prices are simply passed on to consumers. Imports do not offer much cushion for
unexpected demand increases or supply shortages due to the long travel time. On the other hand,
when propane prices do spike, the petrochemical sector may cut back on its use, thus freeing up
supplies for other uses.
What Influences Propane Prices?
Propane prices are subject to a number of influences, some common to all petroleum products, and others unique to
propane. Because propane is portable, it can serve many different markets, from fueling barbecue grills to producing
petrochemicals. The price of propane in these markets is influenced by many factors, including the prices of
competing fuels in each market; the distance propane has to travel to reach a customer; and the volumes used by a
customer. More especially, propane prices are affected by:
Crude Oil and Natural Gas Prices – Although propane is produced from both crude oil refining and natural gas
processing, its price is influenced mainly by the cost of crude oil. This is because propane competes mostly with crude
oil-based fuels (Figure 2).
Figure 2. Propane Prices Follow Crude Oil Price Trends
Figure 2 is a stacked area chart showing the trends of propane prices and crude oil prices over the years of January
1995 through January 2007. For more information, contact the National Energy Information Center at 202-586-8800.
Propane prices are subject to a number of influences, some common to all petroleum products, and others unique to
propane. Because propane is portable, it can serve many different markets, from fueling barbecue grills to producing
petrochemicals. The price of propane in these markets is influenced by many factors, including the prices of
competing fuels in each market; the distance propane has to travel to reach a customer; and the volumes used by a
customer. More especially, propane prices are affected by:
Crude Oil and Natural Gas Prices – Although propane is produced from both crude oil refining and natural gas
processing, its price is influenced mainly by the cost of crude oil. This is because propane competes mostly with crude
oil-based fuels (Figure 2).
Figure 2. Propane Prices Follow Crude Oil Price Trends
Figure 2 is a stacked area chart showing the trends of propane prices and crude oil prices over the years of January
1995 through January 2007. For more information, contact the National Energy Information Center at 202-586-8800.
