Propane is often the answer for homeowners looking for a clean way to heat their homes.
Propane is a by-product of crude oil and natural gas processing.
Suppliers will harvest propane, then sell it via tanks or through a delivery system via tank to residential homes.
You could refill at a certain price one day and then have a completely different price the next day.
The price for propane tends to be as low as $1 per gallon to as high as $5 per gallon.
You may wonder why propane can be so expensive on some days and so cheap on other ones.
Here are 10 reasons propane is expensive.
Why Is Propane So Expensive? (Top 10 Reasons)
1. Tank Size
One factor that influences the price of propane is the size of your tank.
Larger homes are going to need bigger tanks.
That’s because it’s going to take more propane to heat the home.
Smaller homes are going to need smaller tanks.
Your home might also have an alternate source of energy.
You might have a hybrid furnace that also uses electricity to heat the home.
Maybe it alternates between natural gas and propane.
In this case, you might also have a smaller tank since you have an alternate energy source to generate heat.
The size of the tank influences the price because it determines how much propane you need to buy when you refill.
If you have a small tank, then you’re only going to need to pay for a small amount.
An example might be a 30-gallon propane tank.
If the price for propane is $2 a gallon, then it will cost you $60.
However, if you have a 100-gallon propane tank, then it will cost you $200 to fill it.
That’s why determining the right size tank for your home is important.
If the tank is too large for your home, then you might be spending more on propane than is necessary.
If the tank is too small for your home, then you might not be spending your money efficiently since you have to keep refilling your propane tank every few weeks.
Propane is expensive based on your tank size and whether it’s the right size for your home or not.
2. Energy-Efficiency Of The Home
You may be spending more on propane than you need to.
Propane can become expensive if you have to keep using it to heat your home.
If your home isn’t energy-efficient, then you could be wasting your money needlessly.
One of the most important parts of making your home energy-efficient is to check for leaks, holes, or other areas of your home that aren’t sealed properly.
These areas allow the hot air inside of your home to escape outside and the cold air to come inside.
As a result, your home is unable to remain warm.
It needs more propane to keep generating heat inside of it.
By closing up the leaks and sealing the home, your house is better at keeping the warm air inside of it and the cold air out.
As a result, the furnace needs to run less often, and you’ll use less propane.
Another thing to watch out for is your floor type.
Homes with carpets have an easier time staying warm because the fibers hold onto heat better, whereas homes with hard flooring like wood or stone tend to remain cooler.
The hard surface is better at insulating cooler temperatures than warm ones.
As a result, the house has to work a little harder to keep itself warm.
You can fix that problem by placing rugs down on hard flooring during the colder months.
This will help soak up some of the warmth and keep your house warmer for longer.
As a result, you won’t use as much propane.
Making your home more energy-efficient can help you save money on your propane.
Propane is expensive when you’re home isn’t energy-efficient because you end up using more than you need to.
3. Crude Oil And Natural Gas Prices
One of the biggest factors influencing the price of propane is the price of crude oil and natural gas.
Since propane comes as a result of the processing of crude oil and natural gas, it only makes sense that its price is also attached to theirs.
When crude oil and natural gas prices are low, then it usually means there’s enough supply to meet demand.
It might also mean manufacturing and processing costs are low.
If those costs are low for crude oil and natural gas, then they’re also going to be low for propane.
The opposite is also true.
If crude oil and natural prices are high, then the cost of propane is also going to be high.
That’s because there may be problems with global supply chains.
If there isn’t enough supply but a lot of demand, then that means there isn’t going to be enough propane supply either.
The cost is higher.
If manufacturing or processing costs of crude oil and natural gas are high, then they’re also going to be high for propane.
That leads to higher prices for the consumer.
If you ever see the price of crude oil or natural gas increasing, then you can expect the price of propane to also increase.
Propane is expensive when natural gas and crude oil are expensive.
4. Supply And Demand
Several forces can determine how much supply of propane is available for purchase.
Just like many other products, propane also suffers from dips and highs in its supply.
When the supply of propane is high, then it usually means the prices are going to be low.
That’s because the supply is high enough to meet demand.
However, if there isn’t enough supply to meet demand, then the price is going to increase.
That’s because a lot of people are trying to get their hands on propane.
To mitigate demand and make its supply last longer, companies will raise prices.
There are a few reasons the supply of propane might decrease.
One of the most common is the closing of an oil or natural gas facility.
Because crude oil and natural gas are fossil fuels, there’s a finite number of them available on the earth.
Over time, those resources dwindle until there’s nothing left.
If there isn’t any more crude oil or natural gas, then there will be no more propane to make.
As a result, the supply decreases.
Propane companies can increase their supply by drilling for more oil elsewhere.
Eventually, however, there will be no more oil left to discover.
As a result, there will be no more propane.
The number of operational facilities also influences the supply of propane.
During the COVID-19 pandemic, for example, many facilities had to shut down for health concerns.
As a result, only a few remained operational.
The supply of propane decreased because fewer facilities were producing it.
Supply and demand play an important part in determining the price of propane.
Propane is expensive when its supply is low but demand for it is high.
5. Seasonal Demands
As any propane user will tell you, the price for propane tends to become more expensive during the winter.
That’s because there’s a lot more demand for it during the colder months.
Since propane prices tend to impact the country as a whole, if one region is using more propane than normal, then other regions are also going to feel the crunch.
That’s because it affects the global supply of propane.
The northeast and northern parts of the United States experience severe winters.
Temperatures often drop below zero, and snowfall can reach several feet in depth.
When the temperatures drop, people use more propane to keep their homes warm.
The furnace has to work harder to keep the home warm since the cold air from outside is trying to seep inside.
It uses more propane on chillier days than it does on warmer days.
When the northeastern portion of the country experiences a deep freeze, then there are tons of people all using more propane than normal to heat their homes.
Since they’re using more, that means there’s less propane to go around for everyone else.
That raises the price of propane.
The opposite is also true during the warmer months.
Fewer people need their furnace running when the temperature is warm.
As a result, less propane is being used.
Propane companies will use this time to stock up to help keep prices low.
However, they can’t predict how cold the next winter is going to be.
As a result, they can’t predict how much propane homeowners are going to use to stay warm.
The season also impacts how much production occurs at oil refineries and natural gas facilities.
Some refineries close during certain parts of the year.
When this occurs, there’s less supply of propane during certain parts of the year.
That also impacts how expensive propane is.
Propane is expensive during certain parts of the season because of the changes it causes to supply and demand.
6. Supply Proximity
Transportation and delivery costs also play a factor in the price of propane.
Most propane comes from the refineries located in Texas and Kansas.
If you happen to live far away from either of those states, then you’re going to face higher propane costs than those who live closer.
That’s because transporting propane is dangerous.
They have to use special tanks to keep the gas inside of it protected.
If an accident occurs, then it could have lethal consequences.
The further the target location is from a refinery, the more risk it carries of something going wrong.
To help lower that risk, suppliers will invest heavily in their storage tanks and the quality of their drivers.
Those costs add to their operations, which means they pay for them through the pricing of their services.
The distance between you and a propane supplier also impacts your propane price.
Even if you live close to Kansas or Texas, your supplier might not be that close to you.
You’ll still need to pay your share of the cost of transporting the propane from their storage tanks to your home.
You can expect fuel prices, driver wages, and tank investments to make up a part of your total propane service cost.
The further you are, the more fuel they need to reach you, and the higher the bill.
This is different from those who live close to Texas or Kansas or their supplier.
Since there are fewer miles to cross, there are fewer expenses incurred during the transport process.
As a result, it costs less to deliver the propane to your home.
Other factors listed above can also add to transportation costs.
For example, as gas prices go up, transportation costs are also going up.
Your propane bill will also likely be higher.
Propane is expensive depending on how far you are from the refineries and your suppliers.
7. Propane Exports
It isn’t only supply to the United States that propane has to support.
Suppliers also sell propane to other countries.
That means supply can sometimes dwindle if something is occurring in one of the other countries that it ships to.
For example, if Europe is facing an energy problem or an unprecedented cold winter, then it may import more propane from the United States.
That means the supply at home is going to be smaller since more propane went to Europe instead.
If the United States experiences an especially cold winter, then the supply may dwindle even further since those areas impacted by the cold are going to use more propane.
There will be a lot of demand for an extremely limited supply.
This can make the price of propane soar.
It isn’t only propane that’s exported either.
The United States also exports natural gas and crude oil.
If there’s an increase in demand for crude oil and natural gas, then it means more propane is also produced.
If there isn’t demand for propane, then suppliers have an excess supply which can drive prices down.
However, if the other countries don’t need natural gas or crude oil, then this might result in reduced production.
That also means less propane.
When demand rises for propane, there might not be enough supply to meet it, which then raises prices.
Because the United States exports propane, natural gas, and oil, depending on what’s happening globally, it can impact how much propane is available.
If there isn’t a lot available, then the price for propane at home will increase.
8. Leasing Fees On Tanks
When your home uses propane, it isn’t only the propane that you pay for.
You also sometimes pay a leasing fee.
Propane tanks are often too expensive to buy outright.
As such, most homeowners choose to lease a tank from their supplier.
The cost of leasing a tank tends to be around $200 a month.
The cost of buying a tank is around $2,500 to $3,000.
The size of the tank also factors into its rental and purchase price.
For those who lease a tank, the monthly fee is something you have to pay whether you’re getting propane refilled that month or not.
That’s because you’re paying for the ability to store the propane that you’re not using or using minimally.
The benefit of leasing a tank is that when the tank starts to deteriorate, you usually don’t have to buy another one.
The supplier will replace it for you without additional cost.
If you had bought the tank, then you’ll need to pay another $2,500 to $3,000 to buy a new one.
That’s on top of the expenses you’ll need to pay to have the old one removed.
Propane is expensive because you often have to pay a leasing fee or a hefty price to buy one and install it.
9. Type Of Propane
Most people say that they need their propane refilled, but they might not be aware that there are actually different types of propane.
All serve the same basic function, but one type is a bit cleaner and more efficient than the other.
The two types of propane include HD5 and HD10.
There’s also commercial propane that’s similar to HD10 but serves different applications and would never find use in an engine.
HD5 propane is the most expensive type because it contains 90% propane and 5% propylene.
This is the purest grade of propane on the market that’s widely available.
It’s more expensive because it goes through more processing steps to refine it.
The requirement for this type of propane is that 90% of it has to be propane.
Since it contains more propane than the other type, it’s more expensive.
HD5 is common in powering vehicle engines, appliances, and furnaces.
Most users identify it as having a strong blue flame.
The other type of propane is HD10.
It’s cheaper than HD5 because it contains more propylene and less propane.
This version is a little less refined and less efficient.
This type of propane isn’t commonly used in engines since it can sometimes make them stick.
However, it works fine in appliances and is commonly sold at a cheaper price.
It sees most of its use in California.
Propane is expensive depending on the type of propane that you use.
10. More Environmentally-Friendly
A final reason propane is expensive is that it’s marketed as being better for the environment.
While the process of refining propane isn’t environmentally-friendly since it comes from oil and natural gas, it burns cleaner than other fossil fuels.
This means that it produces fewer greenhouse gases when it’s used.
As such, some homeowners prefer to use propane because it’s a slightly better alternative than other fossil fuels.
Manufacturers know this and market it as such.
Because it’s cleaner, they’re also able to add to the price a bit.
They know that people are willing to pay a little bit more if it means helping the environment.
Propane is expensive because it’s marketed as being environmentally friendly.
Propane is a type of gas that’s produced as a by-product of the refining process of crude oil and natural gas.
Because of this, its price is also tied to the prices of these two types of fossil fuels.
Supply and demand based on exports, global supply chains, and seasonal demands can also impact the price of propane.