How this prebuy savings calculator works
A propane prebuy contract can reduce price risk, but it can also add costs that are easy to overlook: multiple delivery drops, program fees, interest on an upfront deposit, and the cost of carrying contracted gallons through the season. This calculator compares two scenarios: (1) prebuying a share of annual gallons at a fixed contract price and (2) buying the same annual gallons at an expected average spot price. It also shows a winter price-spike scenario to illustrate the hedge value.
What you’ll get
- Total prebuy program cost including contract fuel, contract delivery drops, deposit interest, storage carrying, and contingency.
- Total spot-market cost using your expected average spot price and spot delivery fee.
- Net savings (spot total minus prebuy total), plus savings per household if you enter participants.
- Break-even contract price per gallon (the effective per-gallon contract fuel price that would match your prebuy total).
- Spike scenario savings if winter prices rise to your specified spike price.
Limitations and assumptions: Assumptions and definitions (important)
- Annual gallons is total cooperative consumption for the year (or heating season if that’s how you track it).
- Percent to prebuy is the share of annual gallons you lock in at the contract price. The remainder is purchased at spot price.
- Tank capacity is used to estimate delivery drops: drops are calculated as
ceil(gallons / tankCapacity). This is a planning approximation; real drops depend on fill levels and routing. - Contract fuel cost uses
(prebuy price + program fee) × prebuy gallons. - Deposit interest is simple interest prorated by months financed:
deposit × (APR/12) × months. - Storage carrying cost is a per-gallon allocation for tank maintenance, insurance, and opportunity cost of storage.
- Contingency reserve is a percentage of contract fuel cost (not of total cost) to cover extras like leak checks or additional deliveries.
- Spot scenario assumes all gallons are purchased at the expected average spot price and uses the spot delivery fee for all drops.
- Spike scenario applies the spike price to the prebuy gallons and keeps non-contracted gallons at the average spot price (matching the current script behavior).
Formula summary
The calculator builds totals from a few components. Using your inputs:
- Prebuy gallons = annual gallons × prebuy share
- Contract drops = ceil(prebuy gallons ÷ tank capacity)
- Spot drops = ceil(spot gallons ÷ tank capacity)
- Prebuy total = contract fuel + contract delivery + deposit interest + storage carrying + contingency
- Spot total = (annual gallons × spot price) + ((contract drops + spot drops) × spot delivery fee)
- Net savings = spot total − prebuy total
How to use: Worked example (using the default values)
Suppose your cooperative uses 12,000 gallons/year and prebuys 70% (8,400 gallons). With a 1,000-gallon tank capacity, the model estimates 9 contract drops (ceil(8,400/1,000)) and 4 spot drops (ceil(3,600/1,000)).
If the contract is $2.25/gal plus a $0.05/gal program fee, contract fuel cost is 8,400 × $2.30 = $19,320. Add contract delivery (9 × $45 = $405). If the deposit is 30%, the deposit is $19,320 × 0.30 = $5,796. Financing that deposit for 6 months at 5.5% APR costs about $5,796 × (0.055/12) × 6 = $159. Storage carrying at $0.08/gal adds 8,400 × $0.08 = $672. A 5% contingency on contract fuel adds $19,320 × 0.05 = $966.
That puts the prebuy total near $21,522 (your exact result will match the calculator’s rounding). The spot scenario uses your expected average spot price (12,000 × $2.65 = $31,800) plus spot delivery fees for all drops ((9+4) × $55 = $715), for a spot total near $32,515. The difference is the estimated savings.
How to sanity-check your results
- If prebuy price is higher than spot price, savings may still be positive if your spot delivery fees are much higher or if the spike scenario is your main concern.
- If tank capacity is very small, drops increase quickly and delivery fees can dominate the comparison.
- If deposit percent and APR are high, financing can erase much of the prebuy advantage.
- If households is set to 0, per-household savings will display as 0 by design.
Planning notes for rural cooperatives
Prebuy programs are often used by farm clusters, rural churches, and neighborhood buying groups to stabilize budgets. The best contract share is rarely 100%: storage limits, uncertain weather, and cash flow constraints usually lead boards to hedge a portion of expected demand (often 50–80%) and leave the rest flexible. Delivery fees matter because a cooperative may need multiple drops to receive contracted gallons, and each drop has a fixed cost.
This calculator is a decision aid, not a contract review. Vendors may have minimum gallons, different billing for unused gallons, or delivery scheduling rules. Use the results to compare scenarios consistently, then confirm details with your supplier and your cooperative’s treasurer.
Practical questions cooperatives ask
What should we use for “annual gallons” if we only heat in winter?
Use the same time basis for everything. If your records are “heating season gallons,” enter that number as annual gallons and interpret the results as seasonal. The calculator does not enforce a calendar year; it simply treats the number as the total gallons you plan to purchase under the two scenarios.
Introduction: Why does tank capacity affect savings?
Tank capacity is used to estimate how many delivery drops are needed. More drops mean more fixed delivery fees. If your cooperative has multiple tanks, you can approximate by using the effective capacity available for each drop (or run separate scenarios and add them).
What is a reasonable contingency reserve?
Many groups set aside a small percentage to cover unplanned service calls, leak checks, or extra deliveries during extreme weather. If you already budget those items elsewhere, you can set contingency to 0% and treat the calculator as a pure fuel-and-delivery comparison.
Does the spike scenario assume all gallons spike?
No. In this model, the spike price is applied to the prebuy gallons and the remaining gallons stay at the expected average spot price. This matches the current script behavior and is intended as a simple “hedge value” illustration rather than a full market simulation.
Arcade Mini-Game: Propane tank icon Rural Propane Cooperative Prebuy Savings Calculator Calibration Run
Use this quick arcade run to practice separating useful scenario inputs from common planning mistakes before you rely on the calculator output.
Start the game, then use your pointer or arrow keys to catch useful inputs and avoid bad assumptions.