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If the current cost of gasoline is 1.72 where I live, why is the cost of propane currently 3.75 a gallon?
I was led to believe the fluctuations of cost between crude oil and propane mirrored each other. I was told wrong. How do they determine the cost of propane? It's just as expensive as it was last year.
Most of the propane in north america is extracted from natural gas. A certain percentage of it does come from the refining of crude, so the price of the barrel does affect propane pricing, but not directly.
Retail propane pricing is basically determined by four things...
1. cost of fuel from the refinery.
2. freight cost to get the fuel from the refinery to the supplier
3. the cost of delivering the product to the consumer
and here's the biggie!
4. How much profit per litre does the supplier want to make?
The first three are relatively uniform for any supplier in a given area, but margin is entirely up to the retailer! Keep in mind that larger companies may buy fuel on futures, meaning that they bought a large quantity at a certain price when demand is low and draw on that volume from the refinery as they need it. If the market price suddenly drops, they could have a lot of gas that they still must sell at a higher price or they will lose money on it. I would do some shopping of other suppliers and make sure they are consistent.
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