Suffolk County Businesses Face Propane Price Rollercoaster: Smart Strategies to Lock in Rates and Protect Your Bottom Line

The year 2024 has proven to be a challenging period for Suffolk County businesses relying on propane energy solutions. Propane prices may see additional pressure in 2024, even after a disappointing 2023 for producers. Robust supply, stagnant export capacity, and already-elevated inventories spell trouble. With Mont Belvieu ETR propane up 20.125 cents, a 26 percent gain since Dec. 19, 2024, and Conway up 23.75 cents, 32 percent, businesses are experiencing firsthand the volatility that defines today’s propane market.

For Suffolk County commercial operations, this volatility translates to unpredictable operating costs that can significantly impact budgeting and profitability. Suffolk County propane delivery prices are $3.47 per gallon, but these prices can fluctuate dramatically based on market conditions, weather patterns, and supply chain disruptions.

Understanding 2024’s Price Volatility Drivers

Several key factors have contributed to the propane price volatility affecting Suffolk County businesses throughout 2024. According to Procurement Resource, in 2024, U.S. propane prices continue to fall, extending the downtrend observed in 2023, despite rising crude prices. This reflects propane’s role as a cost-effective energy source amidst a significant supply-demand imbalance, with production substantially exceeding domestic consumption.

However, this downward trend was disrupted by several market events. The price spike was initiated by China announcing that it was going to take measures to stimulate economic growth in 2025. That was the primary driver of prices through the end of the year. Then the winter storm hit, causing increased demand for heating sources, which added fuel to the rally.

The structural challenges in the propane market continue to create uncertainty. LPG export capacity in the Gulf Coast (PADD III) is without additional capacity until 2025. Export capacity in 2024, before new dock expansion comes online, could be tight. This could stymie propane’s method of dealing with excess supply if it becomes problematic.

The Impact on Suffolk County Commercial Operations

For businesses in Suffolk County, propane price volatility affects various operational aspects. Industrial and commercial sectors utilize propane for forklift fuel, heating systems, refrigeration systems, and even as a fuel source for patio heaters. Propane pricing volatility, influenced by factors such as supply and demand, infrastructure investment, and transportation methods, adds complexity to the market dynamics.

Local businesses have experienced the direct impact of these price swings. Overall, propane prices in 2025 are expected to remain moderately volatile, with upward pressure during peak seasons and geopolitical uncertainty. This ongoing volatility makes it crucial for businesses to implement strategic approaches to manage their energy costs.

Effective Rate Locking and Hedging Strategies

Smart Suffolk County businesses are turning to proven risk management strategies to protect themselves from propane price volatility. The most common NGL & LPG hedging strategy is a strategy known as a fixed price swap. In short, a swap allows market participants to exchange a floating (index or market) price for a fixed price or vice versa.

Several hedging approaches can benefit commercial propane users:

• Fixed Price Swaps: Many NGL traders and marketers (both wholesale and retail) utilize swaps to hedge their supply costs, inventories and fixed price sales. And last but certainly not least, many NGL consumers use swaps to fix their costs.
• Basis Differential Hedging: One of the fundamental hedging strategies employed by RPDs is basis differential hedging. “Basis differential” refers to the difference between the local propane price and the benchmark price, typically quoted at major trading hubs, such as Mont Belvieu, Texas. RPDs can use basis differential hedging to protect against price disparities between their local market and the benchmark price. By locking in a fixed basis differential through forward contracts — as well as swaps with suppliers or “paper” trading counterparties — distributors can mitigate the risk of adverse price movements and stabilize their margins.
• Strip Trading: By allowing market participants to lock in an average price over a period of time, strip trading strategies can be used by vendors of refined products to offer their customers seasonal price stability through fixed-price programs.

Budget Planning Best Practices

Effective budgeting for propane costs requires a strategic approach that considers both seasonal patterns and market fundamentals. In our study, we used the average price of propane from May-August and compared it to the average price of propane from October-March. Those first months are the traditional period when propane retailers buy price protection for the second group of months which is, of course, the primary sales period for retailers.

Businesses should consider implementing:

• Seasonal Planning: Understanding that moderate price increase in winter months due to strong heating demand and constrained refinery output can help businesses prepare for higher costs during peak seasons.
• Volume-Based Strategies: RPDs face risks associated with fluctuating sales volumes, particularly during winter seasons that are characterized by varying temperatures. A warmer-than-average winter can lead to decreased demand for propane, resulting in excess inventory and reduced revenues. Conversely, a colder-than-expected winter can strain supply chains and lead to supply shortages or price spikes. To manage sales volume risks effectively, distributors must develop robust demand forecasting models based on historical consumption patterns, weather data and economic indicators.
• Multi-Year Contracting: The opportunities are best for 2027. It is often the case that the better opportunities are further out and why we recommend that retailers expand their buying window to the full three-year period. If a buyer is only focused on the upcoming year, finding good buy opportunities gets harder.

Liberty Gas Service: Your Suffolk County Partner

For Suffolk County businesses seeking reliable propane solutions and expert guidance on rate management, Liberty Gas Service stands as a trusted local partner. Liberty Gas Service has been a trusted propane company in Suffolk County since 2010. We pride ourselves on delivering high-quality, reliable propane services that our community depends on. As a local propane company, we know what Suffolk County’s residents and businesses need thanks to our deep roots and local knowledge.

Located in Westhampton Beach, Liberty’s propane terminal is located on Old Riverhead Road in Westhampton Beach. Having a terminal onsite allows Liberty to offer convenient access to a secure propane supply at very competitive rates. The company’s comprehensive Commercial Propane services are designed to meet the diverse needs of Suffolk County businesses.

Choosing Liberty Gas Service, a trusted propane company, means picking a supplier who values safety, quality, and customer satisfaction above all else. Our goal is to offer a thorough energy solution that includes safety, reliability, and customer care as foundational elements of our service. With storage facilities across Suffolk County, NY, we guarantee a steady supply of propane products throughout the year. With our own on-site propane filling station and storage, we eliminate third-party delays and guarantee a reliable supply for our customers.

Looking Ahead: 2025 Market Outlook

As businesses plan for 2025, market analysts provide cautious optimism with continued vigilance. The average price for propane is expected to be 70.04 cents from October 2024 to March 2025, which is about 8.5 cents below the 10-year average. Overall, the average price for propane is expected to be 69.33 cents from 2025 to 2026.

However, while 2024’s price outlook is relatively stable, geopolitical and economic factors can cause unpredictable fluctuations, impacting consumer adoption, making strategic planning and risk management more critical than ever.

Taking Action: Protect Your Business Today

The propane market’s volatility in 2024 has demonstrated the importance of proactive energy cost management for Suffolk County businesses. Hedging for a propane retailer is about managing that risk. The purpose of a hedge is not to make money on the hedge. Rather, its purpose is to remove unknowns concerning the cost of a commodity to be sold.

By implementing strategic rate locking mechanisms, developing comprehensive budgeting approaches, and partnering with experienced local suppliers like Liberty Gas Service, businesses can navigate the challenging propane market landscape while protecting their operational efficiency and profitability. The key is taking action before the next price spike hits, ensuring your business remains competitive and financially stable regardless of market conditions.