In the Know: 2023-24 winter recap

In the Know is a monthly partnership between LP Gas and Propane Resources. This month, Adam Zoellner reviews the 2023-24 winter and how it has impacted the heating season for propane marketers.

QUESTION: What factors defined the 2023-24 heating season for propane marketers?

ANSWER:

The propane heating season of 2023-24 has been marked by varied weather patterns, fluctuating pricing and logistical challenges, culminating in a season that tested both retailers and suppliers alike. Since October, several factors have shaped this season’s landscape, affecting everything from supply and demand to pricing strategies and inventory management.

Weather patterns

For a majority of the country, this heating season brought average to above-average temperatures.

The West and Pacific Northwest were hit with a lot of moisture. A few weeks of ice and snow in the Pacific Northwest caused businesses to shut down and trucks to be pulled off the roads. Retailers down the coast in California were hit with an atmospheric river that dumped months’ worth of rain in just a few days. Higher elevations in the West experienced above-average snowfall, causing more hazardous operating conditions for truck drivers and service techs.

The Midwest saw warm weather in the early months of the season, reducing the amount of crop drying that some retailers rely on to boost gallons. Certain pockets of the North Central had some grain drying, but it was short-lived, with temperatures reaching the mid-50s all the way through late November and December.

The Northeast, mid-Atlantic and Southeast also experienced below-average heating degree-days through the holiday season in December.

January polar air

The most notable event of the heating season for most retailers was the polar air that migrated south in early and mid-January. Even states like Texas, Oklahoma, Arkansas, Mississippi and Alabama saw subfreezing temperatures. With the polar air and a mixture of precipitation, many retailers were forced to keep bobtails and trucks off the roads and had to play “catch-up” on deliveries. These varied conditions not only influenced propane consumption but also underscored the unpredictability of weather and its immediate effect on energy needs.

Supply chain challenges

While propane product was generally available to independent retailers, the logistics of transportation, wait times and overall supply chain management presented hurdles.

The national propane inventory levels were never truly stressed this heating season, which is positive for retailers. Still, most retailers experienced logistical issues. Transportation companies face a fine balancing act of how many transports to maintain during the heating season versus the warmer months. These challenges were exacerbated during peak-demand periods and further complicated by the weather-related disruptions. Suppliers and retailers had to navigate these logistical obstacles to ensure timely and efficient distribution of propane to meet consumer needs.

Economics, consumer behavior

February’s warmer-than-average temperatures prompted a shift in consumer behavior, with many retailers forced to monitor expenses and manage margins. This adjustment reflects the broader economic considerations that influence energy consumption patterns, including the impact of weather on heating costs and the subsequent decisions made by households to optimize their energy use.

This heating season highlighted the critical role of effective inventory and supply chain management. The insights gained will inform future strategies to enhance resilience and adaptability in the face of unpredictable weather patterns and evolving market conditions.

Adam Zoellner is a mergers and acquisitions manager at Propane Resources. He can be reached at adam@propaneresources.com or 913-329-2735.