How can Propane companies just decide to Double the Price Because you use Less?

Question

I recenlty ran out of propane. I only use it for cooking so I have a fifty gallon tank. The tank is the propane companies tank. Anyway, I called to have them come and fill it. When I asked how much it was I was told $4.50 a gallon for "Cooking Propane". Hmmm....Who knew? Anyway, I asked why so much? I was told becuase I only am getting 50 Gallons. I asked how much it would be if I was getting a hundred gallons? I was told $2.37. The propane company in question is a small family owned operation only about 2 miles from my house.

This basically made me want to just call the electrician and have him throw a 220 line down for me to put a new stove in. I called a few other propane companies. One said they were charging $6.30 a gallon for "Cooking Propane". They make it seem like they have to do some special mixture so you can cook with it. It is totally rediculous. All forms of energy should be GOVT Regulated. None of this Free Enterprise Crap for natural resources.

Answer 1

They can and they do because it is perfectly legal for them to do so. Consider this, it’s been a mild winter east of the Mississippi, propane inventories are high to normal, terminal pricing is stable. Then why should your propane rates be going up at a steady rate right now?

Here is a prime example as to why. Major propane companies are MLP’s Master limited partnerships, basically instead of share holders they are referred to as Unit Holders, and instead of dividends, they receive return on their investment in the form of Quarterly Distributions per share. These companies must pay all of their own bills, plus pay this Quarterly Distribution to its Unit Holders. As one can imagine the propane industry is a cyclical business, that is weather driven, and the money is made during the winter months.

So, with this in mind, if a company is not making money because of warm weather, even though supply is plentiful and terminal prices may be stable, you will still see price increases because companies need to pay the Unit Holders ever increasing distributions. These companies are forced to beg barrow and steal from themselves to pay this distribution during the warm months, and now during the winter if they don’t make money to cover this for the coming non-heating season they will go belly-up.

So, as an end user of propane, the treatment you get as a consumer from any propane company is going to be in direct correlation to the amount of propane you use, and the amount of profit you as a customer can contribute to the bottom-line of the company.

You boil all this down and the facts are that propane companies can and will make a profit from you the customer regardless of current supply or demand of the product. When I started working in the propane industry a margin of 25 cents per gallon was profitable, now companies make margins of 60 to 70 cents per gallon and still are forced to tack on other fees and charges to claim to remain profitable.

These companies all have high priced legal departments that advise them on what they can charge state by state, so very rarely will you find that they are doing anything illegal that would warrant reporting to any state agency.

A few years back there was a rouge company that got in a bit of trouble and soon went bankrupt over it, but it just created more legal caution within the industry.

Your best defense as a consumer is to just shop around and make sure you compare apples to apples in regards to service. Always inquire about additional fees as well.

Answer 2

I agree with you there--propane dealers are crooks. It'd been over 5 months since we had our tanks (2x100 gallon) filled and was beginning to wonder if we were going to run out. Called our propane company and they said that they would send someone out next week to fill it. A little over a hundred gallons of propane and they charged us $3.16 a gallon (a whopping 44% increase over this time last year). Something tells me that they're trying to tell us that we don't generate enough profit for them (we use in the range of 300-350 gallons/year). Oddly enough when we called they asked what appliances we have (furnace + range), and it dawned on me that we're being jacked because we don't use enough.

It burns me up even more because I've seen where the price of wholesale (market) propane is trending (DOWN), yet no savings for us.

Answer 3

OOh, that's dangerous commie talk there. I understand that you're upset, and I'm sure that the propane company is bulltishing you. Can you order the bigger, hundred gallon tank? This way the propane company will have to charge you the lower rate, and you'll have to look at the delivery guy less often.

Is natural gas available in your area?

Otherwise, go with what you just said: Get an electric range.

Answer 4

It's called Unregulated Price Gouging. See, the knuckleheads in congress, they depend alot on campaign money from the Petroleum Industry. Now, when supplies are low, the price is high. When it's a mild winter, the price is high. I live in a Resort area and sure enough during the off-season, right around the holidays, gasoline has jumped 25 cents p/gal,

How much do you wanna bet that in a few more weeks, that price will come down? They, The Establishment, The CEO's, The Congolomerates...They are Gouging the crap out of us and we allow it to continue. We're too damn tired working our asses off to pay for all of it, and we can't really properly evaluate the crooks who run for office.

Answer 5

BECAUSE OF THE SIZE OF THE TANK THAT THEY HAVE TO COME OUT TO FILL, I GUESS THAT IT MUST BE A MINIMUM CHARGE. CALL THEM AND FIND OUT.
I LIVE SE,TX AND IT COST $12.50 FOR A 20 LB REFILL. WHICH IS GOOD PRICE.
GO TO A SMALLER TANK AND GET IT FILL YOURSELF AT THEIR PLACE OF BUSINESS.
YOU CAN CALL THE PUBLIC UTILITY COMMISSION AND COMPLAIN

Answer 6

.................Crooks aren't they?????