In the Know: Prepare for heating season

In the Know is a monthly partnership between LP Gas and Propane Resources. This month, Adam Zoellner and Allan Degenhardt point out important steps to prepare for heating season.

QUESTION: How should propane marketers get ready for the heating season?

ANSWER: As we come out of the slow summer months for deliveries, it’s time to begin planning for the increased workload of the hectic heating season.

Here, we share a quick outlook on propane supply inventories and tips for improving your internal processes before winter arrives.

As of this writing, the industry is only 200,000 barrels behind 2023 levels, an incredible 14.3 million barrels above the five-year average. That’s a lot of propane. Conway currently sits 1.4 million barrels ahead of last year’s levels, while Mont Belvieu is only 1.8 million barrels behind one year ago to date.

Last October, we peaked at 102.4 million barrels. We are currently nine building weeks out. If we achieve an average weekly build of 1.1 million barrels, we would be in the range of the 2023 high mark and have 102 million barrels of propane.

Uncertainty and unexpected surprises can always factor in, such as an unanticipated crop drying season. Let’s not forget how an early frost can cut into robust inventory levels, quickly increasing prices.

Process improvements

To prepare for any challenges that may come your way, consider the following steps to improve your internal processes.

Product cost: Tracking product cost can be overlooked during the busy heating season. Establish a process with key members in your organization to relay a laid-in weighted average cost (WAC) of propane to you daily or weekly. Take the last handful of transport invoices, divide the invoice total by the total gallons delivered, and you have your WAC. It can be as simple as your office manager’s sticky note pasted to your door or a weekly email. Tracking your WAC will alert you to product cost changes, allowing you to adjust customer pricing accordingly. With winter gallons making up a majority of the company’s annual gross margin, being financially savvy is crucial to your success.

Fleet maintenance: Make sure bobtails and service trucks are ready for a harsh winter. Change the oil, check brakes, ensure headlights and taillights are in good working order, and stock emergency kits in each vehicle.

Ensure trucks have current registrations, insurance cards and Department of Transportation (DOT) paperwork in the glove boxes. Drivers often need to look through these items regularly, so double-checking everything is in order can save a headache in the middle of winter.

Inventory upkeep: Go into winter with your parts and fittings inventories topped off. Go through the warehouse or storage room, and see what items you might need. Place orders with all of your equipment vendors now so you don’t have to worry about it in January when there are more pressing issues. Nobody wants to take time out of their day to order black iron fittings.

Prepare your team: Have a fall safety meeting or winter kickoff party. Talk with your drivers about issues they experienced last heating season and how you can minimize those issues moving forward. Ensure they know what to do if pulled over for a DOT inspection, speeding or moving violation, or other reasons. Ensure everyone in the organization knows how to report a vehicle accident, yard safety issue or personnel injury. Even rolling an ankle or slipping on ice must be reported so management can document it and take action.

Adam Zoellner is a mergers and acquisitions manager at Propane Resources. Reach him at adam@propaneresources.com or 913-329-2735. Allan Degenhardt works in the supply and risk management department. Reach him at allan@propaneresources.com or 816-813-1956.

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