To put it in simple terms, propane prices follow the trends of other fuels. It is produced from both crude oil refining and natural gas processing so it is easy to understand the relationship of the price to other fuels. Its price is mostly influenced by the cost of crude oil because it competes with crude oil based fuels for business. One of the biggest factors about the price is that it is portable and can serve many different markets. It can fuel barbecue grills and help to produce plastics at petrochemical plants. While the price is down many companies convert to using propane to cut back on costs. When the price goes up many companies convert back to other fuels to save money. The supply and demand is very seasonal. In colder weather the demand and use goes up, making it more expensive. During the warmer months the demand slows and therefore it becomes less costly to purchase.
One of the factors with propane prices is the cost of transportation. It does cost extra money to transport it with tankers and trains. Customers who live farthest from these delivery areas are always going to pay more for the cost due to transportation costs. It is a fuel that has been in demand because of the high cost of crude oil. The demand has continued to grow over the years. More and more companies and even home owners are using propane for various reasons. Many home owners are now using it to heat their water tanks and furnace usage also has grown in popularity. Of course the whole subject of supply and demand does influence the cost.
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The demand comes from two major sources. The first and largest demand comes from petrochemical plants. It is used to make plastics and takes up to almost fifty percent of the market. The second largest demand comes from residential and commercial use. This is what you think of when you normally talk about propane use. It is primarily used for heating purposes in businesses and homes. All of these factors influence prices and the market place. You can usually spot check the price from your local gas supplier or through the Internet sites which carry prices for local areas.
Propane Prices Follow the Trends of Other Fuel Prices in the Market Place
Simon Harris writes about Propane Pricing at http://www.propane-prices.org/
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