Retail propane prices change periodically due to a variety of factors. Some of these factors include weather changes, demand for propane locally and globally, location of propane inventory relative to the market where the product will be sold as well as political and economic conditions around the world. Another important factor that can impact retail propane prices is the current level and recent changes in the wholesale cost of propane.
Wholesale propane prices can have a significant impact on retail propane prices. However, since propane prices are typically not regulated resulting in propane suppliers that are responsible for their own propane pricing and propane profit strategies, wholesale propane price changes are unlikely to impact the retail propane prices charged by all propane suppliers in the exact same fashion. However, it still makes sense for propane consumers to track published EIA wholesale propane pricing information that is available between October and March of each year. Why? Because this information can provide a ‘rough thumbnail’ guideline of the wholesale price of propane paid by propane suppliers on the open market – exclusive of any pre-buy or pre-set pricing arrangement between a retail propane supplier and a wholesale propane supplier. This information may reveal a trend and/or show which suppliers are sharing propane cost savings with their customers as wholesale propane costs may be decreasing.
For example, the EIA Retail and Wholesale Propane Price Report during January 2012 indicated that the average retail propane price across the United States has remained steady in the $2.86 to $2.87 per gallon range. However, during the same period, the EIA reports indicate that the average wholesale propane price per gallon dropped from $1.35 to $1.23 per gallon – which represents a decrease of approximately 12 cents per gallon for the same time period. Does this mean that the propane suppliers with unchanged retail propane prices collected 12 cents more per gallon in profit during this time frame? Not necessarily. There are other factors that may impact profit calculations including the cost of any propane inventory that may have been purchased at an earlier date at a different wholesale price. However, even though several factors can impact current propane prices, it is still important to monitor both local retail propane prices offered by all local propane suppliers and EIA estimated wholesale propane prices as these may indicate a trend showing which propane suppliers are sharing lower propane prices with their customers as the wholesale propane prices decrease. This information may be useful if you are faced with the decision of choosing a new propane supplier in the future.
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