Marketers, state execs mull effects of propane supply issues

January 22, 2014 By    

Propane marketers were begging for colder temperatures two years ago throughout that mild winter. Now, they’re begging for warmer weather that will give them the chance to catch up and overcome the supply shortage that continues to plague many parts of the United States.

Unfortunately for the industry and its consumers, no such warmup is anticipated anytime soon. Instead, temperatures are expected to drop further this week in parts of the Midwest and Northeast. And despite an expected brief warmup in those regions over the weekend, colder weather is supposed to arrive again next week.

On top of colder temperatures, some propane marketers are being told to anticipate further inventory challenges at propane terminals in the coming weeks.

“I’m hearing from a lot of companies that they’re giving 200 gallons to customers – and that’s a big deal,” says Josh Schmoll, a location manager with Wisconsin-based Draeger Propane. “We’re doing a 200-gallon max on a lot of people – not everybody. And we’re hearing that February is going to be worse.”

Betsy Ahner, executive director of the Wisconsin Propane Gas Association, echoes that sentiment for other Wisconsin marketers.

“It’s very difficult for them,” Ahner says. “I just talked to one member who is going to curtail deliveries to his manufacturing customers on Monday. He’s no longer delivering propane for temporary heat for construction. The shortage is hitting everybody a little bit differently – some harder than others – but even those who have been managing well are having problems.”

According to Schmoll, his company has only been getting one load per day out of one terminal it typically sources and one load per day out of another.

“We’re not usually on allocation, and that means you can pull two to three transport loads per day out of a terminal,” Schmoll says. “That forces us to go out of state and get more.”

Schmoll says Draeger Propane is going to the Pine Bend terminal in Minnesota as one source, but it is encountering 15-hour waits there this week.

“It doesn’t really seem to matter where we go,” he says. “We’ve never seen anything like this before. We feel bad there’s a lot of customers who own their own tank. They shop around for price and they’re not loyal to any one company. Companies are turning away people who haven’t been loyal.”

One way Draeger Propane is responding is by not taking on new customers. Other marketers within Wisconsin are doing the same, Ahner says.

“You can’t sell what you don’t have,” she says. “This is like a grocery store full of customers but nothing on the shelves. If you don’t have anything to sell, you’re not making any money.”

Some propane marketers are worried about ultimately losing their businesses, she adds.

“Our members are asking why have we gotten to this point,” Ahner says. “This should be a good winter for us. And yet margins are the tightest they’ve ever been; marketers are paying extra for transportation; they’re paying truckers to wait in lines at the terminals.

“They’re not expecting it to get better until we get warmer weather.”

The weather has been colder than usual in Kentucky, where Kentucky Propane Gas Association (KPGA) Executive Director Tod Griffin says marketers are also experiencing supply challenges.

“People are using a lot of propane,” Griffin says. “Most of our dealers are getting a trickle of supply in – enough to keep everybody filled. We’ve heard some reports of dealers short filling, just to keep everybody with gas. We did hear of a few commercial accounts doing without gas, specifically in the poultry industry.”

KPGA has contacted government officials about the shortage, but government is limited in what it can do in this case, Griffin adds.

“We’ve been in touch with the governor’s office, the division of energy and the attorney general just to make sure everybody is up to speed with our supply situation,” he says.

The long-term damage of this situation, which Bill Van Hoy, executive director of the Texas Propane Gas Association, explores in an interview with LP Gas, is now becoming part of the discussion among industry leaders. Schmoll has a take on the potential damages this shortage could have, as well.

“There are a couple of different things that might happen,” he says. “People could go to alternate heating sources because they can’t rely on getting propane. Customers might be pushing for natural gas expansion because of the infrastructure that we have right now.”

Ahner agrees the potential long-term damage of this shortage is troublesome.

“When a retailer has to stop supplying his forklift customers, they’re going to seriously look at electric forklifts,” says Ahner, referring to one Wisconsin marketer with whom she recently spoke. “He may be losing that business, and he won’t get that back.”

Also, what impact will this propane supply situation have on the industry and its alternative markets, including propane autogas?

“The more autogas you put out there, the less you have for residential heating,” Griffin says. “I think we’re smart enough that we can figure it out, but there have been naysayers from the beginning.”

About the Author:

Kevin Yanik was a senior editor at LP Gas Magazine.

1 Comment on "Marketers, state execs mull effects of propane supply issues"

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  1. Peckham says:

    Good article