In the Know: Manage the tank shortage

In the Know is a monthly partnership between LP Gas and Propane Resources. This month, consultant Cooper Wilburn suggests ways propane retailers can reduce the need for cash to buy new or used tanks as tank prices rise.

QUESTION: What do propane marketers need to know about managing tank assets?

ANSWER: More than likely, the costliest asset for a retail propane operation is consumer tanks. This won’t change anytime soon due to inflation. With the cost of tanks increasing, retailers need more cash to purchase new or used tanks to continue growing their business. Retailers can take a few actions to reduce the need for cash to purchase tanks:

1. Identify zero throughput tanks. Which customers had little or no gas go through their tanks in the past 12 to 24 months? (This time frame depends on where your business is located.) Even if those customers pay tank rent, is it worth leaving the tank at their locations? If you set those same tanks in locations where gas goes through them, you will get margin on the gas in addition to the tank rent. As part of this process, you may find tanks where gas is flowing, but you didn’t fill the tanks.

2. Look at your “loaned” tanks. Maybe you tried to grow your business by offering zero-dollar lease fees at one time. It might be time to inform the customer you’re discontinuing the “loaned” agreement. Identify the customers using the fewest gallons first, and slowly work your way up. Of course, the speed at which you do this depends on your need for tanks. You may have customers to whom you continue to “loan” tanks because they use a substantial volume of gas at a good margin.

3. Resize tanks. Depending on how long you’ve been in business, you probably have tanks that could be downsized because the customer’s propane load has declined over the years. This allows you to reallocate that bigger, and more expensive, tank and set a smaller tank that is more in line with the customer’s propane needs. Just because you set a smaller tank doesn’t mean you need to decrease your tank rent.

4. Increase tank rental prices. With tank prices increasing, many retailers likely have failed to increase their tank rental prices. Depending on your market area, competitors may not be able to offer tanks because of the amount of cash needed to make tank purchases. This gives some retailers the opportunity to charge higher tank rent than they had in the past. Higher tank rent is needed to get the same returns retailers are accustomed to receiving.

By considering zero throughputs, loaned tanks and resizing tanks, retailers can manage the tank shortage and higher tank prices. If this isn’t a short-term problem, retailers need to determine how much they will need to either increase rental fees on tanks or the margin that is charged on gas to help cover the cost of increased tank prices.

Cooper Wilburn is a consultant at Propane Resources. He can be reached at or 913-262-0196.