Propane Price Per Gallon: How Much Does Propane Cost?
Propane’s price per gallon seems pretty clear—except it isn’t. Buyers who want to enjoy propane’s clean, economical energy pay for more than just the propane, and those costs factor into the overall price. Learn more about the factors that affect the cost of propane.
- Typical Range: $3 to $5 per gallon
Maybe you’ve noticed the tall, narrow, side-by-side tanks tucked against the side of a neighbor’s house and wondered what they were. Perhaps you’ve been frustrated that your street doesn’t have natural gas access, since the economic benefits of using a gas water heater and boiler are appealing. If you want to harness the power of natural gas, Installing freestanding or underground propane tanks could be the solution. Propane is a clean-burning, economical form of liquid natural gas that is refilled by a supplier similar to the way oil tanks are filled at a residence. It can be used to fuel appliances, heating systems, and appropriately equipped vehicles.
But is propane more cost-effective than other fuels? There are many factors that contribute to the propane price per gallon, including propane tank sizes, tank installation costs, and the actual cost of the propane itself, which will vary based on location and market. Read on for more information about choosing propane and how to make sure you invest wisely.
Factors in Calculating Propane Price Per Gallon
How does one work out the cost of a gallon of propane? It seems it should be a simple exercise, but there are actually many factors that play into the pricing structure, including production volume, demand, transportation costs, and even the weather. If you’re wondering, “What’s propane’s price per gallon, and what will a propane refill near me cost?” the answer is rarely the same two days in a row. Constant fluctuations in demand, weather changes, and the cost of other fuels all affect the propane price per gallon.
Crude Oil and Natural Gas Prices
Propane is produced from gases left behind during the refining process of both natural gas and crude oil. About 70 percent of propane in the United States comes from natural gas, so the cost of natural gas will affect the overall cost of propane. The closest competitors to propane, however, come from other crude oil by-products, so crude oil prices will more accurately reflect the cost of propane.
Supply and Demand
As with any fuel, the demand for propane will directly affect the pricing of propane tanks for sale. This factor is spread out nationwide, which means a season of high demand in the midwest will raise propane prices in the northeast, even if the northeast has not had a high demand. A lower need for propane will result in lower prices. As a propane customer, it is sensible to pay attention to the ups and downs of supply and demand pricing if the option is available to lock in a rate at a low ebb.
Because propane is used as a heating and cooling fuel in many homes, the weather directly affects the prices nationwide as a component of supply and demand. A frigid winter in the northern part of the country will increase demand, and therefore prices in the warmer parts of the United States as well, and a hurricane can affect pricing in unaffected parts of the country. Suppliers usually try to keep a base level on hand to accommodate these fluctuations, but the unexpected can change prices.
Market and Proximity of Supply
How far you live from a production and storage hub will, in part, determine the price of propane. The United States’ biggest propane storage facilities are in Kansas and Texas, so the gas must be trucked to a local hub in specialized tankers; longer distances lead to increased transportation costs. In addition, the distance between the delivery location and local storage hubs can also affect cost. And all of the previously mentioned factors play into market pricing: Propane is more expensive in the northern parts of the country in the winter because it’s cold and demand is higher, and the weather can cause transportation to take longer.
Production and Export
Propane is a by-product of crude oil and natural gas, so the amount of propane that can be produced is limited by the amount of crude oil that is refined and natural gas that is processed. Any reduction in the volume of oil and natural gas will reduce the amount of propane that is produced and increase the price, while a surplus of oil and gas production will increase the propane volume and reduce the price. In addition, the United States exports propane to other countries, which can affect supply and pricing.
Additional Costs and Considerations
While propane’s cost per gallon is lower than the cost of other fuels, there are other factors to examine when considering whether or not to make the switch. In many cases, the propane company will lease the tank for free as long as the customer uses it for maintenance and supply, while others charge a leasing fee per month. These costs vary regionally, of course, and are dependent on the size of the tank, but they can be substantial—the cost of the tank and installation can run from $400 to $3,500, and the national average is $3,000. An underground tank can incur an additional $1,125 to $5,150 in costs, so it’s important to add them into your decision-making process.
- Tank Installation Site Preparation: Before installing a propane tank, a concrete pad or other stable base must be in place. A standard 1.1-yard pad can run between $75 and $150. Underground tanks will require excavation, starting at $75 and escalating based on terrain, soil composition, size, and distance from the house.
- Tank Installation Cost: The cost of the tank itself will depend on your location, competitive bids from propane companies, and the size of the tank. In general, expect to pay between $400 and $3,500 for the tank itself. Finding a propane tank for sale independently or secondhand is an option, too. Keep in mind, though, that while purchasing a tank outright may seem more economical at $750 to $1,250, many gas companies will not service tanks they didn’t install.
- Meter Installation: Some propane companies will charge by the fill, but most will require a meter for precise measurement of how much propane is in the tank. Meter installation or replacement costs approximately $70.
- Line Trenching and Setting: This is a variable cost, depending on the placement of the tank and its proximity to where the lines need to enter the house. Trenching may be done by the homeowner, but it otherwise costs about $25. Setting the lines usually costs around $100, plus $5 per foot of line. Underground tanks need to be farther from the house, so will cost more in line footage and require an access cap for filling.
- Permits: Permit requirements vary by both state and town or city, and you may need permits from both. It is critical to research this; the permit office of your town will be able to explain the local requirements and may have references for state requirements as well. There are several different aspects of the tank installation that may require a permit, including the permanent pad installation, underground piping, and the tank itself. Unlike some building permits that seem like a formality, permits for propane tank installation are a safety issue: The fire department needs to know the location of the tank and piping, and the municipality needs to be aware of the location of underground utilities for future reference and to avoid unpleasant surprises. Costs will vary, but generally can’t be avoided.
Propane comes in three different qualities; all are created from the same base product, but differences in the method and degree of refinement result in grades that are used for different purposes and are sold at different price points. Most homeowners will use HD5 or HD10. HD5 is the cleanest and most refined of the three grades, while HD10 can provide a more economical option.
HD5 propane, also called consumer-grade or special-duty propane, is the most widely available grade in the United States. Containing a minimum of 90 percent propane and a maximum of 5 percent propylene (hence the name), HD5 is the highest, purest grade of propane that is sold to consumers. Because the requirements state that 90 percent must be pure propane, the cost will be higher, as this grade has gone through more refinement to strip out impurities. It is considered engine-grade: It can be used to power vehicle engines as well as commercial and domestic appliances. When used in a residential setting, users note the strong blue flame.
HD10 propane undergoes slightly less refinement than HD5: it allows for up to 10 percent propylene in the mixture. Propylene is used to create plastics, and in higher concentrations can cause sticking problems in high-grade engines such as forklifts and other vehicles. While it may be used in a vehicle in some situations, it is not the first choice for that purpose. It does not, however, cause any problems in appliances powered by propane and is available at a lower cost than HD5. This grade is mostly used in California.
Commercial propane and HD10-grade propane are often grouped together, and neither is considered appropriate for engine use. This grade of propane is used commercially in other propane applications and would never be used in a vehicle. The requirement for this designation is the lowest: all the gas has to do to be labeled commercial-grade is hold a flame.
Do I Need Propane?
The question of whether or not you need propane boils down to a few considerations, notably cost and the gas’s versatility.
Propane tanks installed outside of homes can fuel stoves, ovens, furnaces, water heaters, dryers, and other appliances, and they are an especially great option for homes that have not been connected to municipal natural gas lines. In addition, propane can be used to fuel light-duty fleet vehicles and heavy-duty vehicles as it’s a clean-burning, generally lower-cost option.
Economic and Clean Fuel
In general, propane costs less than gasoline or natural gas. In vehicles fueled by propane, the amount of energy produced by 1 gallon of propane outpaces the energy produced by 1 gallon of gasoline, so propane costs less and produces more energy. In addition, burning propane creates fewer pollutants and greenhouse gases, making it an environmentally sound choice.
Propane is produced as a by-product when processing natural gas and refining crude oil. The liquid that is recovered during processing includes propane and butane, along with other gases. In addition, great strides have been made in the development of renewable or recycled propane, which is made from discarded cooking oil and animal fats, so the process of harvesting and producing propane is widely available and renewable as an energy source. The United States is the leading propane producer, and public and private propane filling stations and distributors are readily available nationwide, so if you’re wondering, “Where can I get propane delivery near me?” the answer is probably right around the corner.
In our ongoing drive toward fuel independence, propane is a game-changer. The vast majority of propane is produced in the United States and distributed through systems that are already built and maintained. Using propane helps diversify fuel sources and reduce dependence on imported fuel, providing security and stability in the market.
Propane Tank Installation: DIY vs. Hiring a Professional
Because propane tanks must be purchased or leased from a propane company (or if purchased secondhand, must be inspected and recertified by a propane company at a cost of $35 to $60), it is best to work with a professional or team of professionals to select and install a tank. In some cases, homeowners can work directly with the propane company, and for complicated installations, they may wish to consult with expert plumbers in the area to ensure a smooth, safe installation process. Tanks are heavy and difficult to lift, and gas lines can be dangerous if improperly connected.
There are elements of the installation process that a handy homeowner may be able to take care of and use to negotiate the cost of the installation: pouring the concrete pad and digging the trenches for lines are reasonable projects for a handy DIYer.
How to Save Money on Propane
There are a number of ways a savvy shopper can reduce the overall price per gallon of propane. From commonsense moves to carefully working the system, here are some options:
- Buy a bigger tank. Because gas prices vary during the year and in periods of supply and demand, a larger tank will allow owners to stock up when gas prices are low, potentially even for the whole year; volume pricing may also lower the price per gallon.
- Shop around, then lock in low rates. Like other utilities, propane companies compete with each other. Research the rates for different companies, and consider the rates and additional perks they offer (free service calls, maintenance, buybacks, and bonuses), then choose the company with the best overall package. If rates are low, as they usually are in September and October, ask if the company will lock in the low rate for a period of time, which can save money in the long run.
- Ask about discounts. Veterans, seniors, employees of the state or major corporations, memberships in travel clubs or holders of credit cards—you never know what might garner a discount, so don’t be afraid to ask!
- Schedule deliveries carefully. Avoid holiday, weekend, and other peak delivery times which may incur a fee.
- Conserve propane by using less. Install a smart thermostat, keep appliances clean and well-serviced, and choose energy-efficient models. These moves won’t reduce the price per gallon, but they will reduce how many gallons you use.
Questions to Ask About Purchasing Propane
There is a lot of fine print in propane purchase contracts and things a homeowner needs to know before entering a contract to avoid unexpected costs or problems. When choosing a propane supplier, ask these questions of each potential supplier so you can make the best decision for your needs.
- Do you have different delivery options? Suppliers can offer different plans for different prices, and choosing a plan that meets your needs can make a big difference in how much you spend. Automated delivery services will fill the tanks on a preplanned basis, regardless of how much has been used. This is a solid, consistent option. On-demand delivery means users won’t pay for more propane than they need, as the supplier will only deliver when requested. This can be economical, but it can also leave users in a pinch if they unexpectedly run out.
- What charges will I see on my bill besides the actual propane price per gallon? Hidden charges such as rental fees, driver fees, and delivery charges, as well as bigger-ticket items such as early termination, maintenance, and disconnection charges, can add to the propane price per gallon and sneak up on unsuspecting buyers.
- Can you provide your licensing and registration documentation? It is preferable to work only with companies who are registered suppliers and insured in your state. In addition, drivers should be nationally certified to transport, deliver, and install propane and propane tanks.
- What kind of emergency services do you offer? Will the supplier be available if your tank stops working on a weekend? Is their service 24/7, and will you speak to a person? Are there additional charges for after-hours service? These are questions you need answers to before an emergency call needs to be made.
The basics of propane supply, pricing, and overall cost are pretty concrete, but they are complicated. Here are some frequently asked questions that homeowners often have when considering propane price per gallon.
Q. What time of year is propane the cheapest?
In general, September and October are the least expensive times to buy propane. Demand is low because the mild fall air hasn’t turned truly cold yet, and most people aren’t thinking past the steady fall weather to the upcoming winter. Think ahead and fill your tank at lower prices instead of risking being caught without propane during an early cold snap.
Q. Are propane prices expected to rise?
You’ll hear a lot on the news about rising and falling trends of fuel costs, but in reality, the prices of propane, natural gas, and oil all shift very gradually over a long period. Most fuel prices are expected to hold reasonably steady over the next year, regardless of the weather forecast.
Q. How long is a 500-gallon propane tank good for?
A properly maintained above-ground tank can be expected to last anywhere from 20 to 30 years, or even longer, while an underground tank, subject to the acidity of the soil, will last closer to 20 years. A 500-gallon propane tank will hold 400 gallons of propane, and on average will need to be refilled twice a year if it’s used for heating, cooking, and appliances. Tanks used for fewer applications will last longer between refills.