The numbers don’t lie

The American Petroleum Institute says total domestic propane sales for combined residential, commercial, engine, farm and industrial uses in 2006 fell for the fourth consecutive year.

Patrick Hyland

API reports that nationwide retail sales of propane – excluding chemical use – in 2006 was 9.5 billion gallons, almost 9 percent off 2005 sales. By comparison, propane marketers sold 11.9 billion gallons nationwide back in 2003.

In fact, the only states to see even modest growth in sales from a meek 2005 were Arizona, Hawaii, Idaho, Illinois, Montana, Nevada, New Mexico, Oklahoma, Pennsylvania, Washington and West Virginia.

The same states finished in the top 10 retail performances in 2006 as in 2005. All but Illinois saw a sizeable drop in gallons sold. They are:

1. California (590.4 million gallons, down 9.8% from 2005)

2. Michigan (568.8 million, down 33.5%)

3. North Carolina (536.5 million, down 3.7%)

4. Texas (512.9 million, down 14.6%)

5. Illinois (392.0 million, up 5.1%)

6. Minnesota (388.0 million, down 6.5%)

7. Wisconsin (384.2 million, down 10.7%)

8. Iowa (375.0 million, down 6.1%)

9. Missouri (335.8 million, down 20.0%)

10. Ohio (329.7 million, down 7.1%)

The pattern of the last four years has propane marketers and industry officials justifiably concerned. The ominous numbers beg one simple question: Why?

With both gallons and market share down, some marketers are quick to brand the industry’s $100 million marketing blitz since 2001 a failure. They obviously expect to be pumping more gallons after such a huge investment.

I don’t think it’s that simple.

Weather still drives our industry’s bottom-line performance. Record warmth dominated January and February of 2006, and November and December were well below temperature norms. Based on 30-year averages, the nation hasn’t had a “normal” heating-degree winter since 1997!

Although gallons are down, the number of customers is up. That tells me that the marketing has done its job of getting more people to try propane. You can’t blame the ad campaign for $100 crude prices, customer conservation, expanding energy choices or the dramatic upgrades in appliance and building energy efficiencies that have cut the volume of gas that each customer burns.

The only way this industry is going to grow gallons is by finding new applications. That requires new technology, which in turn requires heavy investment in research and development projects.

And, as we have learned after investing $1.3 million over three years to tap into the lucrative cabinet heater market, those seeds don’t always bear fruit.

Industry leadership now must push beyond the shelved cabinet heater debate and find a way to leverage investment into some sort of sustainable market development. Until that happens, Mother Nature remains the only one who can reverse our sagging fortunes.