The residential propane market is not regulated so propane companies are free to set their own prices per gallon. Competition between propane companies helps keep prices reasonable but a lot depends on each customer.
In large part, your choice of propane company will be influenced by the price each company offers per gallon of propane. Requesting quotes from different propane companies and comparing what they each charge for propane will make that choice easier.
Propane price trends
What is important in terms of company propane prices is ensuring the price per gallon follows the general propane pricing trends in your area. The graph below shows US EIA national price trends over the 2012-2013 winter season, for example.
External factors affecting company propane prices
Some factors affecting propane company prices are beyond customers’ control:
- All company propane prices are influenced by the price of crude oil. Indeed, insofar as propane is a byproduct of oil and natural gas production, propane prices follow similar trends.
- Propane prices are affected by supply and demand. The more people need propane, the higher the propane price.
- Company pricing is also influenced by weather and climate conditions. The colder the climate, the higher the propane price. This is linked to the previous criterion since the colder the region, the likelier propane users are to need gas.
- Location also impacts on company prices since the further you are from a major supply source, the higher the transportation costs for the propane company. This tends to be reflected in residential propane prices.
User-related factors influencing company propane prices
Customer propane usage plays a large part in determining the propane prices each company offers. The higher your propane usage, the lower the propane price will be. Propane usage is calculated on the basis of how many people live in a home (usage increases with number of occupants), how isolated a home is (better isolation reduces propane usage), what the climate the home is in (the colder the climate, the more propane a home will use), the number of propane appliances (the higher the number of appliances, the higher the propane usage).
Interestingly, the size of your propane tank has a considerable influence on company propane prices. The larger a propane tank, the lower the propane price tends to be because the amount of propane ordered at each delivery is higher. The reason for this is twofold:
- First, propane companies lower prices for larger deliveries because they are more profitable.
- Second, larger tanks often allow propane orders in summer, when prices are cheaper.
Last, whether you rent or purchase your tank from a propane company affects company propane prices. Indeed, customers with rented tanks tend to be charged more per gallon than customers who own their tank. This is mainly because although buying a tank is a considerable investment, it allows users to shop for the cheapest propane price. Conversely, rented propane tanks are only allowed to be filled with propane from the company owning the tank, which makes higher prices easier to accept.