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Who regulates the price of propane?

Wayne Faulkner
StarNews

Propane prices, like oil and gasoline prices, are not regulated by government, and rise and fall with market demand, futures prices, and the individual market served, according to the U.S. Energy Information Administration.

It is also influenced by prices of competing fuels in an individual market, such as natural gas or heating oil, and the distance it has to travel to reach a customer. Most of the supplies are on the Gulf Coast and the Midwest, the EIA said.

The average propane price to residential customers in North Carolina was $2.823 a gallon on Dec. 13, 2010, the latest date reported by the EIA. That is up from $2.491 the second week of December 2009.

That was higher than the national average of $2.628 a gallon on Dec. 13, 2010, and $2.355 a year earlier.

There are no shortages in the Wilmington area, dealers said. Locally, supplies are stored at retail dealers in above-ground tanks.

Residential use makes up 40 percent of propane use in the U.S., while the petrochemical industry accounts for 49 percent. Farm, industrial and transportation make up the remainder, according to the American Petroleum Institute, an industry trade and lobbying group.

Related link:

Where or how can I safely dispose of old propane tanks for a grill?

User-contributed question by:
David Creasey

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3 Responses to “ Who regulates the price of propane?”

  1. On December 26, 2010 at 6:49 am Edward Alexander wrote:

    I subscribe with Strickland Gas on Castle Hayne Road and have for ten years .my recent auto fill up was in excess of $4 per gallon. I will be in touch with them Monday. What gives do you suppose? Thanks.

  2. On December 31, 2010 at 8:33 am Ned Pitts wrote:

    I have had lengthy discussions with several propane suppliers about the price of propane. There is no fixed price and it can change daily. I have seen it rise over $1.00/gal in a week. The selling price is determined by the current price in the futures market, much like gasoline. Generally, as the futures market price goes up, so does the purchase price you pay. As demand goes up (heating season), the market responds with increasing prices. It is all based on speculation in the futures markets. There is no government control, only market driven competitive pressure. The market pressure has little impact on pricing, as there are only a handful of suppliers. Also, most folks “rent” their tank from their supplier and you can’t legally purchase gas from anyone else. So you are a “captured” customer to that supplier and have to buy propane at whatever that supplier’s prevailing price is. There is no “incentive” for your supplier to give you a really good price, since you can’t go anywhere else. If you change suppliers and switch tanks, there are significant expenses. Owning your own tank can be a partial solution, as you can purchase gas from any supplier willing to sell to you. But some suppliers will charge you an “inspection fee” to fill your tank if you own it. You have to ask. I bought my tank from Jenkins Gas this past summer and switched to Strickland’s Propane. Strickland’s has a Lock In Price program and is the main reason I switched. To be part of the program, you had to join by October 2010 and let them know what volume of propane you would need for the heating season through the end of March. With this information, Strickland’s could go to the futures market and purchase enough contracts to cover the volume their customers would need, thereby locking in their price. I found their “lock in” price to be very attractive. The customer service has been good as well. The only downside to a “lock in” program is if the futures price drops during the heating season, you could pay more for propane than the current market price since your price is locked in. I feel such a drop is unlikely, when you look at past years. I cannot recall a time when the price went down during the heating season and I have been using propane for 25 years. Owning your own tank is the only way you can have leverage, but that doesn’t guarantee you a better price. You still have to shop around to find the best deal, just like any other purchase decision. Now here’s the real killer – propane is a by-product of making gasoline that often costs more than gasoline itself!



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