Most of the time, your wholesale propane agreement is ancillary to your main business, but every once in a while you may begin to wonder whether you’re actually getting a good deal. Perhaps your need have changed, or your contract is up for renewal. For whatever reason, it’stime to look at the basic document that outlines your supply needs, the price,and other details of your arrangement again.
Several key areas can help you size up whether your agreement is meeting your needs: delivery, price, supply, fees,and term.
Delivery
Whether you’re reselling propane or need it to keep production going, delivery is mission critical to your business. Your LPG agreement probably specifies a delivery schedule, and it’s important to examine your needs occasionally to make sure your current contract fits the amount of propane you actually use and when you use it.
Also, delivery fees can add up, so it’s important to review how they are written into the contract so they don’t appear as a “gotcha.” At Smith Gas Liquids, both propane and transportation are included in the delivered price, so there are no unexpected delivery fees.
Price
Make sure the pricing reflected in the contract reflects your understanding of the pricing discussed. There are many ways to agree on price, including:
- Fixed Price/Supply: A pre-agreed "fixed" price for a certain period of time, along with an exact quantity agreement.
- Market Index Pricing: Guaranteed supply priced at an index like OPIS, with a differential added.
- Maximum-Price Contract: A locked-in maximum price for an up-front premium.
- Collar: A range of price protection, creating a floor and a ceiling.
The important thing is that the pricing model fits your supply and business needs, and gives you the best deal overtime. At Smith Gas, you can get a fixed price, and we offer many different fixed price options.
Supply
The number of gallons needed is also set out in the contract. By establishing this agreement, the buyer can be assured that if supply gets interrupted, the contracted amounts are delivered first.This winter, rail delays of North American propane bound for Mexico are likely to availability of propane in the U.S. where rail terminals are the supply source. One of the advantages of a contracted propane agreement is to ensure that you can get the supply you need regardless of current market conditions.
Are you regularly paying for more gallons than you actually use? It may be time to tailor your agreement towards what you actually use. Are you guaranteed the gallons you actually need? Make sure your demand for propane can be met when you need it.
Fees
Pay attention to fees spelled out in the contract in addition to any delivery fees. Your agreement may contain fees for cancellation, installation, failure to purchase contracted gallons, and more. Some seem like they will be unlikely to apply over the life of the contract, and end up having more impact than expected.
Term
Term length of wholesale LPG contracts can vary a great deal. Some can be as short as a year while others can stretch to 10years or more. There can be fees for early termination, so it’s best to begin with a contract that fits your projected business needs into the future. At Smith Gas Liquids, term contracts are for 1 year. Fix contract (prebuy) gallon agreements are available for up to 24 months.
If you want to make sure you’re getting a good deal on your wholesale propane contract, talk to your provider. Make sure you’re working with a wholesale propane company that meets your needs for cost,supply, location, customer service, and safety. Smith Gas Liquids offers customized supply and pricing programs tailored to each customer’s specific needs. Contact us today to work on an agreement that fits your needs.
