Propane prices likely to be higher this winter

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Editor’s Note: As winter begins, we resume our series on propane pricing and trends over the upcoming heating season. Each

Stock photo.

Stock photo.

week we’ll interview a local supplier spokesperson about their company’s policies. Next week we’ll begin listing price per gallon and other charges for all companies that serve the Hill and agree to provide pricing information.

To recap from last year: propane prices are not government regulated. They are market responsive, based on what it costs local companies to buy, store and distribute propane to residential and business users on the Hill. And because propane prices are not government regulated, they are sometimes negotiable, depending on the particular business model of the local supplier.

Because prices can be negotiated, it is important to know what questions to ask in addition to price per gallon before contracting with a local supplier – such as: what is the price per gallon (ppg) for new user “first fill” as opposed to ppg for existing customers; difference in ppg if the tank is owned by customer instead of leased from propane provider (ppg for customer-owned tank can be significantly lower); does propane provider sell tanks, and, if so, what is the cost, for either new or refurbished tanks; what does the provider charge for annual tank rentals (those fees can vary widely among area providers); does the provider have large capacity propane storage facilities either on the Hill or at the bottom of the Hill (if a company has storage facilities, it is better able to keep customer ppg relatively stable when refinery spot prices are spiking); what are the policy differences and additional charges for being on a “fill-as-needed route” as opposed to fill on demand from customer who has elected to call in when they need a fill; and lastly, what charges are there, if any,  for “emergency” fills if, for any reason, the propane tank becomes empty?

Based on national surveys from the U.S. Energy Information Administration (EIA), propane prices this year will be slightly higher than last year. Last year saw historically low prices that held throughout most of the winter heating season.

Retail propane prices nationally are based on “spot” prices at points of production. Many are tied to Mt. Belvieu, Texas, refinery pricing. As of Nov. 11, 2016, Mt. Belvieu’s spot price was $0.553. This time last year that spot price was $0.443. EIA quotes an average national spot price at $0.659 for the week ending Nov. 7.

Nationally, the average retail delivered price was $2.061 for week ending Nov. 7, 2016. Last year at the same time the delivery ppg was $1.919. The difference between spot price and delivered retail price is an up-charge each propane supplier adds to cover their costs of transportation from point of production, storage and truck delivery to end users.

The current ppg breakdown per region for retail propane delivery is as follows: New England $2.928; Central Atlantic $2.758; Lower Atlantic $2.845; Midwest $1.484; Gulf Coast $2.063; and Rocky Mountain and the West $2.079. Last year at the same time, ppg in the West was $1.730.

Each week we’ll interview other Hill propane provider spokespersons about their views on pricing trends and their company policies on ppg and other fees. Andrew Kotyuk, CEO of SoCal Propane, spoke about pricing trends this year.

Kotyuk expects ppg for his company to stay within the $2 to $3 dollar ppg range throughout the heating season. Currently SoCal charges $2.42 to customers with leased tanks and $2.12 for customers with owned tanks. Veterans receive an ongoing 10 cents per gallon discount, when they provide proof of having served in the military. Customers who refer another, receive 10 cents a gallon discount throughout the season as does the new referral.

Kotyuk anticipates a “status quo” season – neither a low price season similar to last year nor high price season more characteristic of 2013 and 2014.

Kotyuk said his company is completing escrow on a San Jacinto storage facility that, when finished next year, will give SoCal the ability to store up to 360,000 gallons of propane. “That will allow us to keep our prices more stable,” said Kotyuk.

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