Propane prices fluctuate as a result of factors such as natural gas and crude oil prices, weather fluctuations, the distance away from supply and a balance between supply and demand, according to Thrifty Propane. Some of these factors influence all products made from petroleum, while others only apply to propane.
Propane is generated by the processing of natural gas and refinement of crude oil, but the primary influence on price comes from the cost of crude oil because most of propane's competing products are based in crude oil, explains Thrifty Propane. Transporting propane across land costs money as well, which is why people closer to the Midwest and the Gulf Coast, the main supply sources, pay less than people in other parts of the country.
In years when the winter is colder than usual, the price of propane often goes up because imports are the only available supply, notes Thrifty Propane. Imports sometimes experience delays in arrival, and propane retailers have to draw down on their own inventories, pushing prices up. Domestic production and inventory levels are two other factors dealing with supply and demand that make prices fluctuate. Production of propane is not a seasonal phenomenon, but consumption is, making winter prices generally higher than summer prices.