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Joe benson

Joe benson

Current Trends in the Propane Market

Steady Rise in wholesale propane prices entering into the summer months.

As the time has passed since our initial lockdown for the Covid-19 pandemic, states and businesses have begun to reduce restrictions on travel, gatherings and events. This is happening just over a year after we saw the lowest price per barrel of crude oil in the nation’s history, bottoming out at around -$40.00/barrel. This drastic change in demand for fuel has caused an astronomical price increase as we’ve transitioned back into a world more akin to daily life before the breakout of the Covid-19 virus. 

While propane and crude oil prices aren’t directly correlated, it should be no surprise to you that the wholesale cost of propane has risen throughout the past 12 months as oil refineries reopen their plants to full capacity and attempt to satiate the rise in demand for fuel. Typically, we see a drop-off in propane prices throughout the summer months as a great majority of the country uses very little in comparison to the winter months. That is not the case this year. Over the past 6 months, we’ve seen a steady increase in wholesale propane prices of around 1-3%/week. This may not seem like much, but since June of last year, our cost of propane has risen over 125%. 

Like many industries during the pandemic, we have faced increased operating costs and have been forced to make tough decisions as a business. We came up with creative ways to offset our losses to be able to provide the same great service for our customers at an affordable rate. The purpose of this blog is not to pat ourselves on the back but rather to inform you about our worries for our customers in the next couple years. 

In all the years we’ve been in business, this is the first time we’ve seen steady increases in propane wholesale cost during the summer months. Due to these rises, we, as well as all other propane companies, have been forced to increase prices for our customers to stay in business. We highly recommend that to all propane users, whether they’re a customer of ours or not, to lock in their propane price per gallon for a minimum of two years. There is a significantly higher chance that the wholesale price will continue to rise over the next year to three years which will continue to drive our costs up. We are able to hedge gallons on behalf of our customers at rates that currently exist today, but only for customers that agree to purchase a set number of gallons with us. We do not hedge gallons based off assumptions that customers will choose to sign our 2–3-year lock in prices in the future. As with anything, you have the choice to gamble that the propane price per gallon will fall in the next year to three years. However, before you make your decision, please remember that we genuinely look out for our customers’ best interests, we are monitoring the price of propane daily and we don’t enjoy raising the price for local residents that support a local company. 

As always, thank you for taking the time to read this blogpost. If you have any questions/comments/concerns, or would like to give us feedback, please feel free to send an email to info@superiorfuelcompany.com.

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