What Affects The Price of Propane?
Propane is refined from commodities that are traded in the global market — like oil and gas — and as such, the price fluctuates depending on several factors. In this blog, we review the biggest factors that influence propane pricing.
Pro Tip: To get the most accurate daily price for propane in Southern Ontario, check out our online pricing tool here.
Main Factors That Affect Propane Prices
The price of a commodity like propane fluctuates dramatically based on its supply, both internationally and domestically. The factors that affect the supply of propane can include:
- Exploration and production : The majority of propane is produced from natural gas liquids, or NGL’s. NGL’s are a derivative of natural gas and crude oil production. Increases in natural gas and crude oil exploration and production naturally lead to increases in propane.
- Pipelines: The building of new pipelines, the changing of pipeline routing, or the closing of existing pipelines such as the potential shut down of the Line 5 pipeline.
- Predictions on future demand: The attempt to deliver propane is based on predictions of future needs. For example, the demand for fuel over the last two years was speculated to be lower due to lower levels of travel.
- Changing levels of strategic reserve: Countries use the Strategic Petroleum Reserve to help control the price of crude oil.
- Changing trends in the workforce: A shrinking workforce — such as the one experienced during the COVID-19 pandemic — can lead to dramatic changes in supply.
- Transportation: Events such as rail strikes and truck blockades that affect the free flow of goods and services can affect supply.
Much like supply, several factors can affect the demand for propane, such as:
- Exports: The Shale Revolution led to a dramatic increase in North American crude and natural gas production over the last two decades. North American propane is now a major supplier to Europe and Asia. This has resulted in North American pricing being driven by world demand as opposed to a made-in-North-America price.
- Seasonal changes: During our cold Southern Ontario winters, demand for propane increases as we require additional heating.
- Extreme weather: Extreme cold weather can also affect fuel production, creating a shortage of fuel that drives up pricing. For example, the 2021 winter storm in Texas drove a surge in the energy market that was felt across North America.
- Natural disasters: Events such as hurricanes, tsunamis, wildfires, and flooding can affect production and exportation, which also influence pricing. These events are occurring at a more frequent rate which can contribute to the increased fluctuations we see in oil prices.
- Crop drying & agriculture: If crops are holding too much moisture, they require considerably more drying. This increases the usage of propane to power the dryers, thus affecting the demand for propane and driving the cost up.
- Feedstock: Propane is a feedstock in the petrochemical industry for propylene production. Propylene may be converted into a variety of products, mostly plastics and resins, and also glues and solvents.
- Acts of God: COVID-19 has greatly impacted demand for propane byproducts, from increased production of plastics and PPE equipment to higher demand for construction and manufacturing.
3. Geopolitical Factors
Geopolitical events that create uncertainty in the market can have a direct impact on what you pay to fill your propane tank. Some examples include:
- Global conflicts: Tensions that arise between countries can play a part in price fluctuations. We can think of Europe’s current energy crisis — made worse by political strife between Russia and Ukraine — as an example.
- Political events such as elections, sanctions, political uprisings as witnessed in Venezuela are contributing factors in price fluctuations.
- Cultural events such as the Olympics or a Lunar New Year can play a role.
- War, famine, and humanitarian crises.
As you can see, there are many factors that play into the propane pricing equation, which is why we see pricing fluctuate so much.
How Is My Propane Priced?
At Bryan’s Fuel, we are committed to supplying propane competitively and will adjust the customer’s price exactly in step with the fluctuation of the Sarnia wholesale price that is posted publicly.
We post the price of propane on our website and update it daily. As a customer of Bryan’s Fuel, you will only pay the price per litre of propane. There are no delivery fees or environmental charges.