How Do Propane Dealers Set Their Prices?


Quick Answer

Propane dealers set their prices based on variables such as the current cost of crude oil, refinery costs, seasonal climate changes, and the balance between supply and demand. Prices can also vary depending on whether the propane tank is leased from the supplier or owned by the customer.

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Full Answer

Although a dealer's propane prices are primarily determined by market demand, they are also influenced by a dealer's operational expenses. A significant expense comes from remaining in compliance with state, local and federal government requirements. Dealers must comply with hazardous materials reporting and compliance training, follow and report on Occupational Safety and Health Administration measures for workplace safety, and prepare fire safety audits and disaster response plans submitted to state and federal agencies.

Propane dealers must also pay licensing fees imposed by state propane regulatory agencies. In addition, employee background checks through the Federal Bureau of Investigation, federal and state driver qualification requirements filing and reporting, and routine security emergency plans submitted to the Department of Homeland Security all increase the cost of doing business.

In order to retain a license and remain in operation, each dealer must also purchase insurance, which requires evidence of compliance for the state, local and federal regulations in addition to underwriter requirements. Finally, propane dealers have fleet maintenance expenses, payroll, taxes, fuel costs and numerous other operational costs.

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