In the Know: State of the propane industry

In the Know is a monthly partnership between LP Gas and Propane Resources. This month, managing partner Marty Lerum reviews the past 25 years and its impact on the propane industry.

QUESTION: How has the U.S. propane industry changed over the past several decades?

ANSWER: While mulling over the topic for this month’s “In The Know,” we thought it might be interesting to compare the propane industry’s current stats and standings with the same data from 25 years ago.

Twenty-five years ago, the Propane Education & Research Council (PERC) had just been born with about $20 million per year to assist propane retailers and supplement the growth and safety of the propane industry.

Today, PERC funding of about $50 million per year is starting to gain traction with higher level marketing, education and training programs – across multiple market segments – to benefit and grow the propane industry.

Over the past decade, the U.S. went from being a net importer of propane to a net exporter, largely due to the shale boom. (Data source: U.S. Energy Information Administration)

Propane fundamentals

Currently, the U.S. produces 140 percent more propane than its demand. In the past, we needed to import propane to meet customer demand.

The retail propane industry could double in size and still have enough propane that it would not materially affect the cost compared to its biggest competitor, electricity.

Industry consolidation over the past 25 years has narrowed the number of U.S. propane retailers from 6,500 to 3,500.

Marketing and operations

Propane should ride the clean fuel for the environment wave. The retail propane industry benefits from PERC’s support in this area.

It will now take marketing companies providing service and support to expand the retail propane industry.

“You call, we haul” retailers are just fighting for their local competitors’ business with contracting on margins and increasing costs to operate. This is not the formula for higher net income or longevity.

Leveraging technology on the expense side and the gross margin side of the profit and loss statement is the way to profitability and longevity.

Marty Lerum is managing partner of Propane Resources. He can be reached at marty@propaneresources.com or 913-262-8531.