Propane Supply and Demand

In addition to the long-held popularity of propane as a portable fuel source, firing up backyard barbecues and camp stoves, nearly 5 million American homes rely on propane as their primary heating fuel.

• Because propane is a by-product of the natural gas and crude oil refining processes, propane supplies are tied closely to the production of these other resources.
  
  
• While propane is produced year-round, residential demand is highly seasonal, concentrated in colder months. Under normal conditions, sufficient amounts of propane have been inventoried in warmer months to meet wintertime demands. If, however, there has been a dip in oil or gas production, less propane is stored and prices go up.
  
  
• Colder-than-normal weather can put extra pressure on propane prices because there are no readily available sources of new supply other than imports.
  
  
• Residential and commercial users represent 45 percent of propane demand. The petrochemical industry (plastics, etc.) buys 40 percent of the propane produced. However, propane is just one possible raw material and petrochemical producers can switch to other options if propane prices get too high.

For more information on propane supply and demand, see the Energy Information Administration's brochure, Propane Prices What Consumers Should Know (January 2008).