FAQ (Frequently Asked Questions)

1. What is the difference between Propaneprice.com and the free pricing updates I receive from many suppliers? Those free pricing updates are usually a list of postings for the next day which often arrive late in the day. They include a margin for the supplier. Propaneprice.com provides data on actual trading being completed at major hubs four times a day. Often you can notice a trend up or down early in the day and make decisions sooner about whether to lift a load that day or wait until the next day. A savings of two and a half cents per gallons will pay for your annual subscription for a year. In addition, Propaneprice.com will often provide more in-depth information which you can tailor to your business not only for the current day but for planning for the next 12 months.

2. Why should I be concerned with Crude Oil? Propane is produced from either refining crude oil or fractionating natural gas liquids. Approximately half comes from refining crude oil so the price of crude oil is always a major factor affecting the price of propane. In a balanced market, the price of propane is about 75% of the price of crude. Supply and demand in the petrochemical industry plays a major role in the fluctuations above and below 75% of crude because the petrochemical industry alternates between using many products such as naphtha, gas oil, butane, ethane and propane.

3. Why should I be concerned with Natural Gas? About 50% of propane is produced from fractionating natural gas liquids. The price of natural gas is always a major factor affecting the price of propane. Natural gas sets the floor for propane because if natural gas is valued higher than propane, propane is left in the natural gas.

4. Why should I be interested in Refinery Production? Refineries produce propane from crude oil as a by product of making motor gasoline. Refineries in North America use natural gas to make refined products from crude oil. When natural gas becomes more expensive than propane, refineries cut back their natural gas use and use propane to run their refinery. This loss of propane production causes propane inventory to decrease and prices to increase.

5. Why is Trading Activity Such a Major Factor? Traders of commodities have become more and more a factor affecting energy commodities in the past several years, especially crude oil. Traders buy propane and other commodities when they think they are undervalued and sell them when they think they are overvalued. Because of the large volumes they buy and sell they are one of the major factors contributing to price volatility.

6. Why are Imports and Exports a Key Factor? Imports and exports of propane affect inventory levels. When propane prices in North America are lower than prices in other parts of the world we see more exports which lowers propane inventory and increases prices. When propane prices are higher than Europe and Asia, North American sees more imports increasing inventory and decreasing prices.

7. What are Other Key Factors Affecting Propane Prices? Weather is certainly a key factor. Weather affects inventory and demand levels not only for propane, but also for natural gas and heating oil.

The propane distribution infrastructure becomes a major factor in propane pricing on a regional level as demand increases and the infrastructure is pushed to the limits of its capacity to deliver. Once demand outstrips the distribution delivery capacity in a region other distribution chains must develop by trucks or tank cars from another oversupplied region in North America. The price of propane will continue to rise in the undersupplied region to a price level high enough to develop this new distribution network. This increase in price for this time period is called a “Basis Blowout.”

Geopolitical events such as an oil worker strike in Venezuela or war in Iraq can impact supply of propane. Emotional reaction to such events often plays a major role as suppliers and buyers base decisions on anticipated outcomes to such events.

Energy inventories of all commodities are the net result of all supply and demand factors. As inventory levels trend up or down from normal levels this will cause price volatility up and down.