Nationwide sales up but supply, delivery problems persist

March 1, 2009 By and    

The American Petroleum Institute says total domestic propane sales for combined residential, commercial, engine, farm and industrial uses in 2007 were up for the first time in five years.

API reports that nationwide retail sales of propane – excluding chemical use – in 2007 was 10.2 billion gallons, a 7.9 percent upgrade over 2006 sales.

Michigan reclaimed the top spot among individual retail performances by leapfrogging California, and Pennsylvania bumped out neighboring Ohio to crack this year’s top 10.

Here is how they finished:

1. Michigan (665.2 million gallons, up 16.9% from 2006)
2. California (648.2 million, up 9.7%)
3. North Carolina (554.9 million, up 3.4%)
4. Texas (461.4 million, down 10.0%)
5. Minnesota (426.7 million, up 9.9%)
6. Wisconsin (425.1 million, up 10.6%)
7. Illinois (421.0 million, up 7.4%)
8. Iowa (405.6 million, up 8.2%)
9. Pennsylvania (377.3 million, up 15.1%)
10. Missouri (376.8 million, up 12.2%)

In Maine, where marketers have gotten real traction replacing fuel oil furnaces, propane sales jumped a whopping 48.9 percent to almost 129 million gallons, according to API.

And given the healthy crop-drying demand and cold weather in the final quarter of 2008, next year’s numbers could be even better.

The bad news is we remain victimized by supply problems like those that had New England marketers howling about lost sales during what should have been a healthy winter.

Inadequate early season allocation and weather-related shutdowns along the TEPPCO pipeline had tankers at the Selkirk, N.Y., terminal parked 80-90 deep to pull rationed loads in February. Area marketers had to scramble – and pay a premium – for product from Ohio, Indiana, Illinois, Michigan and North Carolina. Meanwhile, no spot waterborne supplies were available and spot rail supply costs hit record premiums.

“This is the craziest time I’ve witnessed in my life in this business for sure,” one exasperated New York marketer told me in mid-February.

It’s not only TEPPCO customers with supply concerns either. Dixie Pipeline Co. last summer served notice that it was revising propane shipments in ways that would challenge supply for our customers across the Southeast. Dixie wanted to degrade propane service moving west to east by eliminating long-standing preference provided in the tariffs.

It also wanted to add east-to-west refinery-grade propylene (RGP) service from Louisiana to Mt. Belvieu. The National Propane Gas Association said the change to a batched system would require propane marketers to have seven days’ worth of storage.

Both situations demonstrate a crying need to better secure delivery of product in a time of fast-changing energy priorities and dynamics.

Fortunately, help may be on the way. The Propane Education & Research Council has agreed to finance an in-depth analysis of the U.S. propane industry’s infrastructure and deliverability issues. The study, which should be done this summer, could answer growing concerns that infrastructure is not keeping pace with nationwide propane demand.

The last study of this type in 2000 recommended marketers install more bulk plant storage, which led to industry leadership securing federal tax incentives for those investments.

This one will examine the impact of primary inventory levels, railcar commitments and rolling storage, fall fill levels of customer tanks, imports/exports and heating-degree days on product supply to each region of the country. It will determine if – and where – infrastructure bottlenecks exist and offer solutions to mitigate them.

Industry leaders think the report will enable the propane industry to identify and assess the likelihood of future supply bottlenecks. With that insight, we should be able to better plan for supply shortages and target long-overdue capital projects to expand pipeline infrastructure.

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