What Causes Fluctuation in AmeriGas Propane Prices for Consumers?


Quick Answer

Factors causing AmeriGas propane price fluctuations include supply and demand, weather and the price of crude oil. Because crude oil prices are volatile and people have no control over the weather, price spikes sometimes occur.

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What Causes Fluctuation in AmeriGas Propane Prices for Consumers?
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Full Answer

Like other products in a free-market economy, AmeriGas propane prices are subject to supply and demand. As of 2015, there are adequate supplies of propane to meet the heating needs of customers, and reserves ensure propane users are able to heat their homes. However, when the demand begins to cut into reserves, prices increase due to the greater demand. When the demand decreases, prices drop and distribution centers refill their reserves.

Supply and demand for propane relate closely to weather patterns. Since one of the primary uses of this fuel is for heating, when temperatures drop, the demand increases. Extended cold weather often brings price increases, while a warmer than normal heating season allows customers to enjoy lower prices.

Propane is a byproduct of crude oil and natural gas production. When the price per barrel of crude oil increases, so does the price of propane. Because propane is also useful as a fuel for internal combustion engines, increases in the price of gasoline or diesel cause an increase in its use in dual fuel engines, further increasing prices.

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