Good news for the propane users – the current prices for fuel are expected to continue through the season and next year may see a decrease.
Last winter saw prices more than triple from the same period in 2013, averaging $4.857 per gallon on January 27, 2014.
Average prices for the state as of January 12, 2015 are $1.809 per gallon. That’s still approximately 33 cents higher than in 2013. But with petroleum prices dropping, David Neal of New Horizons Cooperative (Cenex) believes the propane price will drop lower as they negotiate contract prices for next year.
New Horizons is selling propane lower than the current average price at $1.69 per gallon for cash sales off the truck and $1.79 per gallon on charge account sales. However, prices can vary by quite a bit between one provider and the next.
“(Contract) prices are based on how much you buy and how quickly you use it,” noted Jim DeLap of DeLap Oil & Gas Company in Viroqua. “You watch the market, make your contract when you think you are getting the best price. But if it goes down a week later, you are still stuck with that price.”
That gamble has left DeLap with a somewhat higher price for the season at $1.849 per gallon on cash sales. But, as with Neal, DeLap sees lower prices as the most likely scenario when he makes his next supply contract. In the meanwhile, both are confident that supplies are more than adequate for the season.
“We have been able to keep up with demand, which has been less intense (than last year) with the warmer weather,” Neal said. “And if we do get colder weather, well, we are already part way through the season, so it isn’t going to be a problem.”
There was some concern displayed by Governor Scott Walker’s office after the pipeline feeding the Janesville and Dubuque, Iowa terminals was shut down for repairs earlier this month. Governor Walker declared a precautionary energy emergency relaxing rules on hours for motor carriers and truckers who transport propane in case they need to travel to other terminals.
The Janesville terminal was closed for most of a week, according to Neal. He saw the closure as little cause for concern in Southwest Wisconsin, though did note it may have caused some issue for the northern parts of the state.
Neal noted that in addition to lower propane prices, gasoline has been at a relatively low price, which could change purchasing habits once winter is over.
“We do see a little more sales inside the stores, but gasoline sales have stayed pretty steady,” Neil said.
The drop in prices does not cut into their margin, Neil explained, since the state sets a minimum price and the company sets prices so they make a certain amount per gallon. With a similar margin in use, not a great deal of variation is seen, though competition can drive the price down.
Prices may rise slightly, though current predictions from the Abu Dhabi Investment Authority suggest it may be three to five years before oil prices stabilize at $70-90 per barrel, pushing average prices per gallon of gasoline back into the $3 range. Current prices are still under $50 per barrel.