I just got a letter from our propane supplier and a related contract to lock in next years supply (900 gallon) at $1.029! I definitely think that there is more upside risk than downside so we will do this.
Comments?
It is in SE Iowa and for some reason, unknown to me, the prices in this immediate area are almost always lower than in other areas.
Seems like a good price. Compared to what they pay in this area, I'd jump on that. Fast.
As long as it's just a contract and you don't have to prepay any of it, absolutely. That's about 1/2 of what my last contract fill cost. If they want money up front (and I expect they do), I'd be very wary.
That's because agriculture is a huge propane user and you have the infrastructure (i.e. pipelines) that can supply it for a reasonable price. It costs considerably more outside of farm country.
They give you several choices for payment but money up front is the cheapest ($1.029). If you make payments it is a few cents higher. With interest rates as low as they are it makes no sense NOT to pay up front.
It makes a whole lot of sense not to pay up front when you consider that you are making a bet that the company will still be in business next winter.
If you can take a flyer on $1000, by all means go for it. Just realize that if that company goes under, you make be scrambing.
BTW: If you'd like to see a good site for propane prices across the US, try this:
Note that the average wholesale price for propane right now is just under $1/gallon. With the cost of delivery and storage, your dealer is offering you pretty close to a loss leader, which is great as long as they honor the deal.
What? The average wholesale price was $.639 as of 03/30/2015. I would say that would give them some room for delivery.
If they are purchasing the propane today, yes. But you still have to account for storage costs. Plus, this time of year is the cheapest for propane as the heating season has ended. Next fall, prices will be higher. How much higher is an open question.
You don't know if the supplier is going to contract for propane next fall, what the fall futures price is, or if the supplier is betting that the prices will be as low as they are now and plans to take the risk.
Bottom line - if you are dealing with a large, established supplier who has a track record for this kind of deal, it may be a risk worth taking. If you are dealing with a small supplier with a 100 residential accounts and a single truck, the risk is different. If you annual uage is 900 gallons, I'd think about buying another 500 gallon tank and filling both now. That way you can always fill at the end of the heating season at the lowest seasonal cost.
My gut sense is that you should take the offer.
When I changed energy suppliers, I took the fixed rate, figure it's not likely to go down.
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Might be duplicate message. I'd take the fixed price. Little chance of price going down, in the modern USA.
- . Christopher A. Young learn more about Jesus .
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