What is a good gross margin per gallon on retail propane?

Most small distributors target 40 to 55 percent gross margin on delivered residential propane, which in a normal market translates to roughly $1.00 to $1.50 of margin per gallon. The exact number depends on your delivery efficiency and local competition, but the key is indexing retail to wholesale so that margin holds when the rack price moves.

How often should I reprice propane?

Reprice at least weekly, and immediately any time your wholesale cost moves more than about 5 cents a gallon. Distributors who set a price in the fall and leave it usually sell winter gallons below replacement cost during a rising market. A formula that references current wholesale plus a target margin keeps you protected automatically.

How much propane is in a 20 lb exchange cylinder?

A 20 lb cylinder holds about 4.6 gallons of propane when filled to capacity. Many exchange programs fill to only 15 lb, so know exactly what you put in. Be consistent, because underfilling erodes trust with retail accounts and overfilling quietly destroys your per-bottle margin.

When do propane cylinders need DOT requalification?

Most steel DOT cylinders require requalification 12 years after the manufacture date stamped on the collar, then at 5- or 12-year intervals afterward depending on the requalification method used. A cylinder past its due date is illegal to fill, so tracking requalification dates across the whole fleet is essential to staying compliant and avoiding fines.

What fees can I charge besides the per-gallon price?

Common line items include tank rent, first-fill and regulator fees, small-drop delivery minimums, emergency or same-day trip charges, out-of-gas leak-check fees, pump-out charges, and demurrage on rental cylinders held too long. These are standard in the trade and directly offset the real cost of serving lower-volume or off-route customers.

How to Price Propane Delivery and Cylinder Exchange Jobs

# How to Price Propane Delivery and Cylinder Exchange Jobs

Propane is one of the few products where the wholesale cost can swing 40 cents a gallon in a single week and your customer never sees it coming. That volatility is exactly why most small propane distributors leave money on the table. They set a retail price in the fall, forget about it, and quietly watch their margin evaporate every time the spot price at Mont Belvieu ticks up. Pricing propane well is not about picking a number. It is about building a formula that moves with your cost and protects a target margin on every gallon and every cylinder.

This guide walks through how experienced operators price both bulk delivery and cylinder exchange, the fixed costs most people forget to load, and the compliance dates that quietly determine whether a truck is even legal to be on the road.

Start With Your True Cost Per Gallon

Your landed cost is not the rack price. It is the rack price plus everything it takes to get that gallon into a customer's tank. Build it up in layers:

Wholesale product cost. Your posted rack or contract price, typically quoted per gallon. In a normal market this sits somewhere between $0.90 and $1.60 depending on the season and your supply contract.
Freight/transport differential. If you truck from a terminal, add the per-gallon cost of your bobtail or transport runs. This commonly adds $0.05 to $0.15 per gallon.
Delivery cost. Fuel, driver wages, truck maintenance, and insurance spread across gallons delivered. A bobtail burning diesel and running a route rarely costs less than $0.20 to $0.35 per delivered gallon once you honestly allocate labor.
Shrink and hold. Propane expands and contracts with temperature. Meter variance, tank heels, and small losses are real. Build in 1 to 2 percent.

Add those up and you have a delivered cost floor. Everything below that floor is a loss, no matter what the retail sign says.

Price Bulk Delivery: Index, Don't Guess

The single best habit in this trade is indexing your retail price to wholesale cost with a target margin, then repricing on a set cadence. A simple, defensible model:

> Retail per gallon = (Wholesale cost + delivery cost per gallon) / (1 - target margin %)

If your loaded cost is $1.40 and you want a 45 percent gross margin, your retail is $1.40 / 0.55 = $2.55 per gallon. When the rack jumps to $1.70, the same formula pushes retail to about $2.91, and your margin holds. Distributors who reprice weekly or every time wholesale moves more than 5 cents almost always outperform those who set-and-forget.

Second, tier your pricing by delivery type and volume. A residential keep-full customer taking 200 gallons on a scheduled route is far cheaper to serve than a will-call customer who calls at 8 percent and demands a same-day drop. Common tiers:

Keep-full / auto-delivery: best price, because degree-day forecasting lets you batch the route efficiently.
Will-call: add $0.10 to $0.30 per gallon for the routing inefficiency.
Emergency / same-day / off-route: a flat trip surcharge of $75 to $150 plus a premium per-gallon rate.
Small-drop minimum: anything under roughly 100 gallons should carry a minimum delivery fee, because the truck costs the same to send whether it drops 80 gallons or 300.

Don't forget tank rent, regulator/first-fill fees, out-of-gas leak-check charges, and pump-out fees. These are legitimate line items and they add up.

Price Cylinder Exchange Separately

Cylinder exchange (the 20 lb grill bottles and forklift cylinders) is a different economic animal from bulk. Here you are pricing a filled and inspected asset, not a metered gallon. A 20 lb bottle holds about 4.6 gallons of propane. If your loaded cost per gallon is $1.40, the gas alone costs roughly $6.44. Then layer in:

Cylinder handling, fill labor, and requalification amortization.
Cage rent or retail commission if you place bottles at hardware stores and gas stations.
Valve replacement, OPD compliance, and the cost of retiring failed bottles.

Exchange programs live or die on fill discipline. Many exchange bottles ship filled to 15 lb instead of a true 20 lb capacity. Whatever you do, be consistent and know exactly how many pounds you put in, because underfilling is the fastest way to lose a retail account and overfilling destroys your margin. Retail exchange typically runs $22 to $30 to the consumer, with the distributor netting a healthy margin per bottle once the cage is turning.

The Compliance Costs That Set Your Real Overhead

Propane pricing that ignores compliance is fantasy pricing. Two dates in particular drive real cost and real risk:

DOT cylinder requalification. Most steel cylinders require requalification 12 years after manufacture, then every 5 or 12 years after depending on method. A bottle that is out of date is illegal to fill. Tracking requalification due dates across a fleet of hundreds or thousands of cylinders is the difference between a legal fill and a fined one.
NFPA 58 inspections on bulk tanks, bobtails, and transfer equipment, plus your HAZMAT/CDL driver certifications and hours. A lapsed driver medical card or HAZMAT endorsement can park a truck.

Amortize requalification and inspection costs into your per-gallon and per-cylinder pricing. A distributor who spreads a $35 requalification cost over the expected refills of that bottle prices correctly; one who ignores it is slowly decapitalizing the fleet.

The Propane & LPG Cylinder Distribution Ops Kit is built exactly around this problem. It pairs a bulk gallon pricing calculator indexed to wholesale cost and margin target with a cylinder fleet register that flags the 12-year DOT requalification dates, a HAZMAT/CDL driver certification and hours tracker, an NFPA 58 bulk-tank and bobtail inspection log, and a customer tank-monitor plus degree-day reorder forecast. It turns the scattered spreadsheets and paper logs most distributors run into one workbook. The free buyer's guide that comes with it walks through the indexing formula step by step if you want to see the math before you build.

Common Pricing Mistakes

Pricing off last month's rack. In a rising market you will sell gallons below replacement cost and not notice until the statement.
One flat price for every customer. Keep-full and emergency will-call are not the same job. Charging them the same rate subsidizes your worst customers with your best ones.
No delivery minimum. Small drops on a bobtail are almost always unprofitable without a minimum fee.
Ignoring degree-days. Forecasting consumption from heating degree-days lets you fill tanks on efficient routes instead of chasing out-of-gas emergencies at a loss.
Forgetting demurrage on rental cylinders. Industrial customers who sit on your bottles are tying up capital. Track and bill demurrage.

Put It on a Cadence

The distributors who win at pricing do three things on a schedule: reprice retail against wholesale at least weekly, run a degree-day reorder forecast so trucks roll full on efficient routes, and review the requalification and inspection calendar monthly so no asset goes illegal. Price the gallon with a formula, price the cylinder with fill discipline, and load compliance into both. Do that and a propane operation with volatile input costs still throws off a predictable, defensible margin every single week.