Understanding Propane Pricing and Avoiding Common Pitfalls
Another Company Offered a Lower Price
If you’ve been offered a low price for propane and wonder if it could be a gimmick, you’re not alone. Pricing in the propane industry can be misleading, but we’re here to help explain it and provide clarity on propane pricing.
Is it a New Customer or Promotional Rate?
If you’ve received an offer from a competitor with a much lower price, it’s likely just an introductory price even if that wasn’t disclosed. Many companies offer special low prices to new customers or people that haven’t ordered from them in a long time. These initial savings may look attractive, but over the long term may cost you significantly more. An old saying may apply here: If it sounds too good to be true, it is.
Can You Verify Their Long Term Rates?
Do you know anyone that uses them with the same setup as you and has been a customer of theirs for over a year? If so, ask them what they are currently paying. This will give you a good idea of their long term rates and what you will be paying once the promotional period ends.
Way Below the Average Price on Long Island?
The New York State Energy Research and Development Authority (NYSERDA) conducts weekly/biweekly surveys of Long Island propane companies, measuring the average propane price for users who consume over 1,100 gallons per year.
On 10/2/2024 the average price for Long Island is $3.89 per a gallon. You can check the latest figures here: NY State Propane Prices
It’s important to note that over the last few years, many of the local family owned propane companies have been bought out by three large multi-state propane companies but still go by their original names. So there is a good chance this average is based on a company providing you a quote.
If Our Rates Were Higher… Why So Many Switch to Propane Depot?
If we were actually higher priced than another companies regular rates, why are so many people switching to us for a lower price? Our rapid growth has been mainly contributed to people switching to us.
Actual quotes from our customer reviews:
- “I recently changed Propane companies to Propane Depot! …The best part is the Price! I’m saving a ton of money with this company!”
- “…their prices are lower than the big companies. I just could no longer deal with my previous provider.”
- “…Propane prices much better than our former provider.”
- “…There cost was much cheaper and again the customer service was great.”
- “…charging half of what my prior propane supplier was charging me for propane. …thank you Propane Depot for literally saving me a pile of money.”
Calculate Your Actual Overall Cost Per Gallon
Average Price After The Rate Increases
While an introductory offer may save you now, it’s important to recognize that the price increase later could be significantly above what you are paying with your current provider. This increase may cause your average price paid to be above what you are currently paying. The longer you continue at the long term rate the higher the average will be.
Additional Costs That Increase The Price Per Gallon
How much is their safety, compliance, and or delivery fee? If it is higher than what you pay now that increases the overall price per a gallon. Furthermore, many companies will deliver more frequently, because they’re in your area that day or they are trying to meet gallon quotas for the month. For everyone of these extra deliveries a year you are paying the fees which further increases your average price per gallon.
Average Price Calculation
For example let’s say you are offered $2.29/gallon from another company. If you have a 500 gallon tank and receive 3 fills of 250 gallons at the introductory rate, then the next three fills are at $3.85/gallon, your average price paid equals $3.07 per gallon.
Now factor in if their delivery fee is $6 higher than what you pay now, that is an additional $36.00 before taxes. And if they deliver more frequently than your current company, adding in two more deliveries for the same overall gallons the total additional fees could be $65-75, bringing your realized cost per gallon to $3.12. If you continue getting more deliveries, your average price paid per gallon just keeps increasing.
How Will You Know When The Price Increases
Unfortunately, many people forget to check pricing when the promotional rate ends or even worse they were never told it was an introductory rate. Even if you are watching your bills, you most likely won’t know the price you’re currently paying till the actual delivery is made and then it is too late.
Is the Price Even Possible?
It’s important to know that the wholesale price paid by propane companies doesn’t vary that much regardless of company size. Even being a small family owned business, we’d lose millions a year selling at these low introductory rates. This loss would increase drastically as the gallons per a year increased, nevermind the higher operating expense that often come with a large corporation. Having a few new customers at this special rate for a temporary period is ok as long as the average price paid is much higher.
Understanding Pre-Buy Programs
Pre-Buy programs require you to pay upfront for a certain amount of gallons at a fixed price prior to the season and have to be delivered during a specific timeframe. They can offer some savings, but they can also include fees and restrictions, making them not be the great deal they initially appear to be. Be sure to ask about what happens if you overbuy or underbuy, any administrative, and/or delivery fees. Also, will they deliver more frequently than actually required which cost you additional delivery fees?
Most companies will not refund you for the gallons you overbought, but will apply a credit on your account for future deliveries. However these future deliveries will be at their regular rates not the special pre-buy price. You are now forced to purchase gas from them at whatever rate they feel like charging you at that time.
In the below example scenario we’ll assume your last delivery of 300 gallons consists of 50 gallons at the pre-buy price and 250 gallons at their regular rate. The overall price you paid per gallon increases dramatically.
Pre-Buy Average Cost Per Gallon Calculation:
- Pre-Buy price: 400 gallons @ $2.19/gallon
- Pre-Buy Admin Fee: $70
- Deliver Fees: $70.00 (due to two extra deliveries than actually necessary)
- Last fill (regular price): 250 gallons @ $3.95/gallon
Overall Cost Per Gallon Delivered = $3.08 far above the pre-buy price of $2.19/gallon
For information about pre-buy programs, click here
The Propane Depot Way
We Believe in Honest Pricing
As a local family owned company, honesty is important to us as we want long term clients. When we quote propane prices we don’t quote a low introductory price, while keeping our actual long term customer rate a mystery. Our actual pricing is clearly shown on all propane price quotes. This is one of the reasons we maintain a 5 star google rating.
View Your Current Price on Our Portal/Phone App
Just by logging into your account on our portal or phone app, you can view your current price. We believe our rates our the best out there and have nothing to hide. You should find out your current price after the delivery is made.
Our Markup Is Fixed
Our markup is a fixed amount and not a percentage of cost. It never changes based on time of year or how long you’ve been a client of ours. Any price fluctuations are strictly due to changes in the wholesale cost, which are influenced by supply and demand, weather patterns, and global events.
The Bottom Line
When it comes to propane pricing, what might seem like a great deal at first glance could cost you more in the long run. Always consider the additional fees, the long-term pricing model, and the transparency of the company you’re working with. At the end of the day, we believe that consistent, fair pricing and clear communication are what truly benefit our customers.
