How do you predict the future price of propane?


Quick Answer

As propane is a commodity that is highly influenced by changes in temperature, its price varies seasonally, going up in winter months and down in summer months, as demand changes. Other factors that affect the price of propane include domestic and foreign supply and alternative heating sources.

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Full Answer

A study by the U.S. Energy Information Administration found that about 10% of U.S. households use propane or natural gas to heat their homes, as of 2015. This means that demand for propane rises in the winter and falls during the summer, which causes the price to rise and fall, as well.

Seasonal changes in demand are historically the largest cause of changes in price for propane and are quite easy to predict; however, energy companies exert counter-cyclical pressure on propane demand during warm winters, as they often switch from coal to natural gas as natural gas prices fall. Such was the case during the winter of 2011-2012, when energy companies shifted away from coal and shifted demand for natural gas up, causing prices to return to normal.

The price of propane is dependent on supply-side factors as well; chiefly, how much is being produced by domestic natural gas companies. Their production levels are dependent on the yield of current wells and the discovery of new sites for drilling, as well as the development of new drilling and processing technologies.

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