Why Do Propane Prices Keep Going Up?

Written on: April 11, 2022

Understanding the Propane Gas Market and Price Fluctuations

home fuel prices delawareWe don’t need to tell you that prices are spiking on just about everything. From frozen fish to fertilizer, the cost of almost everything is up. But perhaps nowhere is the pain more acute than fuel.

While dealing with higher propane prices can be frustrating and downright painful at times, try to take comfort that propane remains one of the most cost-efficient ways to heat your home and fuel your appliances.

Many of our customers want to better understand the factors causing propane prices to rise. Here’s a breakdown of why the fuel that heats your home is more expensive.

Propane Price Swings Are More Moderate than Oil

It’s worth noting that swings in propane are less extreme than heating oil, gasoline, and other fuels derived from crude oil.

The reason is that propane is an entirely domestic form of energy. In fact, the U.S. exports more propane than we use. So, while propane is susceptible to the same market forces as oil, its abundant North American supply offers more security.

Factors That Contribute to Propane Price Fluctuations

Even though propane is somewhat insulated from market forces, they still have an effect. Here are some of the contributing factors to rising propane prices.

Supply and Demand

High demand and lower-than-average inventory often drive higher propane prices. Propane demand goes well beyond heating homes and powering appliances. Recently, global demand rose because of propane’s use as a petrochemical feedstock. Petrochemicals serve as the basis of products like plastic, paper, adhesives, and detergents. Petrochemical manufacturers are the largest consumers of propane.

Global Strife 

War, political turmoil and natural disasters impact crude oil and natural gas prices. Propane is a by-product of both crude oil and natural gas. Rising prices for these fuels have a ripple effect on propane.

There is also a lot of speculation involved. Before the start of the war in Ukraine in late February, energy prices rose in anticipation of potential sanctions against Russia’s energy sector. Even the hint of a possible disruption in energy supply influenced buying and selling by commodities traders. In the frantic world of investment, this is known as the fear factor, and it’s only become worse since the invasion of Ukraine.

Export Requirements

The U.S. is a significant propane exporter, and that export business continues to grow. Many propane suppliers are obligated to provide the quantity to export, leaving less propane inventory for domestic consumption.

Extreme Weather

It makes sense that colder months bring higher propane demand. In scarce markets, this leads to higher prices, and this compounds when cold weather continues longer than expected. And it’s not just cold temperatures that can increase propane demand. Heavy rains during the agricultural growing season create bumper crops that need to be dried rapidly. Propane is among the fuels used for crop drying.

There are several other factors contributing to propane price increases, such as transportation bottlenecks, energy policy, manufacturing trends, delivery costs, and pandemic-specific workforce and supply-chain issues.

How Can Delaware Propane Help?

Historical trends have shown us that, with energy prices, what goes up must come down. The question is, when will relief come. We can all agree: the sooner, the better.

In the meantime, if you’re concerned about falling behind on your propane bills, contact us as soon as possible. We can often work out a solution together, especially when you get in touch with us early. The best solution for many of our valued customers is a monthly payment plan.
  
You can get in touch with us here.

We all hope that—regardless of what happens with energy prices—we will soon be living in a more peaceful world, where children don’t have to sleep in bomb shelters anymore.