Patience is paying off in propane price protection

July 22, 2025 By Mark Rachal

Trader’s Corner, a weekly partnership with Cost Management Solutions, analyzes propane supply and pricing trends. This week, Mark Rachal, director of research and publications, stresses the importance of not locking in price protection above the 10-year average price.

Catch up on last week’s Trader’s Corner here: Understanding recent crude fundamentals changes

Earlier this year, we wrote a Trader’s Corner where we shared that one of our clients called about buying propane for this coming winter in February. Propane prices were high at the time he called. He would have locked in price protection at 12 cents or higher than the 10-year average winter price (October through March).

We had just gone through a strong winter storm, and propane inventories were low.

Please Fill Out The Following Fields. — Chart 1: Total U.S. propane/propylene inventory

Chart 1 plots propane inventories. The arrow shows where inventories were at about the time of our conversation. He was being told that he should go ahead and buy for the coming winter because supply was only going to get tighter and prices higher.

I acknowledged that the people who were telling him to buy might be right. Perhaps inventories were only going to get tighter, and prices would be much higher by winter. It was certainly possible that buying price protection around 85 cents for this winter would have been the right thing to do.

However, we told him we would not do it because he would be taking on undue risk to falling prices to protect his customers from higher prices. In fact, we said in the Trader’s Corner following that conversation that we would rather have wolves gnawing at our guts than take on the downside price risk of locking in at 85 cents with so much time before next winter for inventories to replenish.

Since that conversation, we’ve written numerous articles where we showed data that backed our belief and hope that inventories would replenish quickly, and better opportunities would present themselves to propane buyers over the course of the summer. We had no way of knowing for sure if that would be the case, but we believed the right way to play was to be patient.

From March to May, inventories were not replenished, and propane prices were staying high, save one brief opportunity. During that time, we kept replaying that conversation and many more like it in our mind, our own words haunting us. It is in those times of doubt that our emotions start taking over and our discipline and resolve can crumble. It was getting harder to tell clients to be patient.

Propane marketers can reassess and repurpose tank assets that are already in the field to avoid buying new tanks at relatively high prices. (Photo by LP Gas staff) — It can be stressful for propane buyers when inventories don’t replenish as expected. (Photo by *LP Gas* staff)

Finally, in June, propane inventories began to replenish at a faster pace. At that point, we were relieved and encouraged, but not in our wildest dreams did we think inventories would now be above last year’s record pace. But that is exactly what happened.

As we write on June 18, Mont Belvieu ETR propane for the winter months of October through March is priced at 74 cents. That is just a half-cent above the 10-year winter price for MB ETR. For a brief period on June 17, MB traded at 73 cents for the winter months. We are hoping this winter gets valued below that 73.5 cents mark again for those that are using that benchmark for buying. Just like in February, there is no guarantee of it, but the conditions are there for it to happen.

Anyone that has been a reader of Trader’s Corner knows that we believe strongly that propane retailers, and really all of us in the industry, need to do all we can to protect the end consumer from spikes in propane prices. We can’t completely protect our customers from high prices, but some level of price protection can at least help mitigate the shock when it happens. It benefits everyone in the industry to try and take the full brunt of those price spikes off the table for the consumer so that they continue to benefit from the product that provides our livelihoods.

However, propane retailers simply can’t take the risk of locking in prices that are well above the long-term averages. It is a balancing act between doing right by our customers and not taking undue risk. Thankfully, when compared to prices in February, the propane pricing environment is very close to where that balance can be struck. We have had our doubts since that February conversation, but thankfully, patience has paid off.

Chart courtesy of Cost Management Solutions

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