L P Gas prices this winter,

 

You have some improved pricing. Propane was $2.59 when we filled up before Christmas.

Wow, Ed-  That's $3.34/gal!!!

So... Propane is C3H8... and it's a byproduct of petroleum refining and processing of natural gas.  The price variation we see, is more a function of how 'active' the refinery is at any given time... it is substantially a 'supply side' model, as refineries will NOT process petroleum based on demand for propane-  they'll sell off propane as they process crude or Natural Gas.  If they're running lots of oil for diesel, gasoline, lubricants and plastics industries, the cost of propane will be low.  If they're shut down, or running very low volumes due to economic or other issues, there won't be much propane, so price will go high.

Propane contracts, at least in MY area, are rather confusing if you don't understand WHY they run 'contracts'.

When I sign up for a contract for 2200 gallons, it's not actually a situation where I'm FORCED to buy 2200 gallons at that price... and I've had years where I didn't use HALF of that contract volume... and they only charged me for what I had delivered... which really confused the heck out of me, so I spoke with them about it, to make sense of it all.

When I sign the contract, I'm basically promising to buy at that rate, under the conditions identified on the contract, and my ESTIMATED NEED will be, say, 2200 gallons.

THEY take that contract, and the hundreds of others, and add 'em all up, take it to the financial office, who looks at it and decides WHEN, and HOW MUCH to 'lock in' on the petroleum futures market.  The finance office is basically working with their banking investors to arrange financial backing for the national petroleum market purchase.

Now, it doesn't stop there... they don't buy it all in one lot, they buy it in 'scheduled' timeframes... so like... a weekly, or bi-weekly delivery schedule, and if they have multiple receiving terminals, pipeline routes, truck transports, etc., it'll be all organized-out that way.

Once that purchase PLAN has been settled, they start taking deliveries AS LONG as they have adequate storage volume.

Then they make deliveries to their customers, and when there's day-purchase (non contract) customers knocking on their doors, they look at their stock and delivery obligations, figure out if they have enough excess to sell off-contract, and set the price partly according to the national non-contract price, but also weight it based on their excess availability.

It's basically no different in say... listening to the farm report prices for March beans...

The greatest 'cost' is transportation, so location of a refinery or pipeline is where the cost will be significantly lower than places where it isn't.