Avoid Getting Burned by Rigid Propane Contracts

Volatility is part of doing business in the propane industry. Prices can shift quickly due to weather, infrastructure issues, or global market changes. When things are stable, your supply contracts may seem like a solid safety net. But when the market starts moving fast, those same contracts can feel like a trap – or a lifeline – depending on how they’re written and managed.

Supply contracts are designed to give structure to your purchasing. But in a volatile market, fixed terms can create pressure on both sides of the agreement. It becomes more important than ever to read the fine print, review your options, and build flexibility where you can. If you’re not careful, a contract that once protected you can put your business at risk when prices swing too far in either direction.

Know What You’re Locked Into
The first step is understanding the full scope of your contract. That means knowing exactly what volumes you’ve agreed to, what price points trigger penalties or surcharges, and whether there are options for flexibility. If your contract has take-or-pay terms, for example, you could be paying for gallons you don’t need during a warm winter – or scrambling to find more when demand suddenly spikes.

Even contracts that appear straightforward on paper can come with side clauses or force majeure language that creates surprises. If your supplier’s costs go up due to global supply changes, will they pass those increases on to you? And if they do, how quickly will that hit your books?

Create Room to Adjust Without Breaking Terms
While some contracts are strict, many allow for minor volume adjustments or renegotiations within a certain range. The key is keeping communication open with your supplier. If you anticipate a drop in customer demand or a spike in usage, let them know early. This allows both sides to adjust expectations and, in some cases, restructure the deal for mutual benefit.

Some companies create a blend of short-term and long-term supply contracts to reduce risk. This can help you lock in better rates on part of your supply, while keeping room to adapt to sudden changes in pricing or customer needs.

Factor Risk Into Your Pricing Strategy
When your costs are uncertain, it’s harder to set stable prices for your customers. One way to stay ahead is by building a risk buffer into your pricing model. That might mean adjusting margin expectations slightly to allow for price swings or offering tiered pricing options for large customers who want predictability.

The goal isn’t to pass all risk to the customer. It’s to make sure your company stays profitable even if supply costs jump. A contract that protects you only works if your pricing model supports it.

Talk With Your Legal and Financial Teams
During volatile periods, it’s smart to loop in your legal advisor and accountant before signing new supply deals or adjusting existing ones. They can help you evaluate what the contract means for your cash flow, what liabilities you’re taking on, and how it will impact taxes and insurance costs.

This kind of review doesn’t have to slow you down; it simply helps you avoid unpleasant surprises. Having a trusted expert explain contract terms in plain language is one of the best ways to make good decisions under pressure.

Stay Proactive, Not Reactive
Markets change fast, but your reaction shouldn’t be rushed. The more you plan for volatility, the less it will shake your operations. Review your supply contracts regularly, not just at renewal. Set up alerts for price changes. Track your usage trends and keep a pulse on market forecasts. These habits give you the power to make changes before a contract becomes a problem.

Why This Matters When the Market Shifts
A propane business runs on trust – between your team, your customers, and your suppliers. When supply contracts get tested by market swings, that trust is tested too. By staying informed, reading the fine print carefully, and planning ahead, you protect your margins and your reputation. That kind of steady leadership helps you weather tough seasons while others scramble to do so.

Keeping Control During Uncertain Times
When volatility hits, your supply contract can either work for you or against you. The difference lies in how well you prepared. Clear terms, open communication, and flexible planning keep your business grounded when prices fluctuate. Instead of reacting to every shift, you’ll be ready – keeping your operations steady and your customers confident, no matter what the market does next.