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Propane prices occasionally spike disproportionately from what is expected from
normal supply/demand fluctuations. The main
cause appears to lie in the logistical difficulty
of obtaining resupply during the peak heating
season. Because propane is produced at a relatively
steady rate year-round by refineries and gas
processing plants, there is no ready source
of incremental production when supplies run
low. Propane wholesalers and retailers are forced
to pay higher prices as propane markets are
bid higher due to dwindling supply. Consequently,
higher propane prices are simply passed on to
consumers. Imports do not offer much cushion
for unexpected demand increases or supply shortages
due to long travel time. On the other hand,
when propane prices spike, the petrochemical
sector may cut back on its use thus freeing
up supplies for other uses.
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