Market analysis: How lower oil prices can lead to higher propane costs

Crystal Flash always strives to provide exceptional customer service. One of the ways that we do this is by keeping our customers up-to-date on market trends to help provide solid information for informed decision making — yet another example of what we refer to as The Crystal Flash Difference.

The divergence of crude and propane pricing

With the crude oil market at historically low prices, one might assume that propane would follow the same downward trend. However, this is not the case in this situation.

• Before COVID-19, the oil market was already starting to show signs of production outpacing demand.
• COVID-19 caused a massive decrease in oil product demand, with fewer people driving, fewer planes flying, and fewer trucks and manufacturing needing diesel.
• The decrease in demand for unleaded and diesel fuels has increased global inventories to record-high levels, driving down prices, and subsequently, production.

While oil products such as gasoline, jet fuel, and diesel have seen major reductions in demand, propane has not. Propane is primarily used as a fuel to heat homes, buildings, barns, and run grain dryers. It is also used as a feedstock for petrochemical products, such as polypropylene — a basic product that is used in many everyday applications like plastic containers, clothing and rug fibers. Propane’s main use as a heating fuel means that its demand levels are dictated by Mother Nature, so it is not impacted by COVID-19 and the global economy as much as other oil products.

U.S. propane production comes from two main sources — crude oil and natural gas drilling (close to 75%), and oil refineries (25%). Low oil and gas prices have led many producers to shut down production due to unfavorable economics. Many oil refineries are running at reduced rates or have shut down completely for the same reason. With propane production falling and demand staying relatively stable, many market analysts are predicting a potential propane shortage for this upcoming winter — even if it is just an average cold winter.

The Crystal Flash Difference #23: “When the bitter cold Michigan weather takes its toll, you never have to worry about Crystal Flash running out of propane. Unlike most other suppliers, we buy and store millions of gallons to ensure we have the propane you need, when you need it, all at a reasonable price.”

For more Crystal Flash Differences, visit crystalflash.com/cfdifference.

The Crystal Flash Difference

Thankfully, Crystal Flash plans ahead! As a Crystal Flash Price Protection Customer, you can rest easy knowing that your propane supply will not run out and your pricing is already secured. Crystal Flash is always looking ahead to ensure that we can provide security of supply at the best prices available. While some other companies may find themselves paying high market prices and struggling to fill orders this winter, Crystal Flash’s customers will experience routine propane deliveries, exceptional service and affordable rates.

Contact your Crystal Flash sales representative at 800.875.4851 or sales@crystalflash.com to lock in your propane pricing for the 2020/2021 heating season!