Steps to 2023-24 winter success

A recent Wall Street Journal article reported that the U.S. produced 19 million barrels per day (bpd) of crude oil, natural gas liquids and other gas liquids in April of this year, besting a previous monthly record of 18.1 million bpd set in November 2019.

Total propane produced is over 2.6 million bpd compared to 2.3 million bpd last year. As a result of this increased production, the U.S. Energy Information Administration expects the U.S. to be a net exporter for the fourth year in a row, with all liquid product net exports increasing by 13 percent over last year.

Another result of this increase in production? Lower supply prices compared to last year.

That said, although supply prices are lower, all other costs are higher, and they will likely remain higher due to a variety of inflationary issues. In fact, you’ve surely seen increased costs across virtually all facets of your operation.

So, what does this all mean for propane marketers? Here are some tips to help you deal with these higher costs.

Start by communicating with your customers now to ensure they understand why overall supply costs are not dramatically lower than last year. Your customers will notice that it’s more affordable to fill up their cars these days. Many will assume that since they are paying less at the gas pump, their propane bill will be less than last year’s, too.

Customers need to take into consideration the other inflationary costs you’ve incurred over the past year. Be sure to clearly communicate that you’re doing what you can to keep expenses in check, but prices will indeed be higher than anticipated. You simply cannot reduce your margins to cover the additional expenses.

Although customers will be your primary external audience, don’t overlook the importance of communicating with your employees. Help them understand how your operating costs have risen significantly. You don’t want to hear them quietly agreeing with customers who are grumbling over the phone about this year’s price increases.

As you begin to assess your supply plans, learn from the past. Look back at your last three years. What went smoothly and what didn’t? Take steps now to correct the difficulties you faced during both warm and cold winters.

Take a close look at your current customer base to estimate volumes by category. Understand your potential supply needs for residential, commercial and agricultural customers, as well as for keep-full and will-call customers.

Schedule your loads in advance. Plan at least a week ahead and confirm your disposition each morning. Don’t wait until the end of the day to schedule your next delivery; you could lose out.

Don’t put your eggs in one basket. And don’t just plan to pull from three different suppliers. If they’re all working from the same supply point, that’s not really diversification. Plan to pull from multiple supply points, as well.

Start now to improve efficiencies. Some processes to address include:

Convert will-call customers to keep-full. Constantly having to squeeze in will-call deliveries, which often are not easily added to your delivery routes, can be a problem. And even if you charge will-call customers an extra fee, the hassle and inconvenience can be a substantial drain on your efficiency.

Enhance your online presence. Be sure both your website and social media posts have all the important information your prospects and customers need to do business with you. And if you haven’t embraced email marketing, do it sooner rather than later.

Encourage customers to use your online ordering system. Hopefully you’ve already implemented a website portal that allows customers to pay online, check their account balance and order additional service. We’ve implemented our Crestwood Connect portal to allow marketers to do the same thing, but on a wholesale level.

Consider implementing tank monitors. Being able to track your customers’ usage will save you loads of time. At a minimum, place tank monitors at your bulk plants.

Hopefully these suggestions will give you a jump-start on making the winter of 2023-24 one of your most profitable years ever.

Related:

• Winter preview: Shift in mindset
• Calling on winter propane demand
• EIA: Propane households likely to spend less on energy this winter
• Propane industry looks back at 2013-14 winter
• Propane inventory starts winter at record high

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John Powell is senior vice president and head of Crestwood’s Marketing, Supply & Logistics Group. Crestwood helps marketers create supply plans tailored to their business needs. He can be reached at john.powell@crestwoodlp.com.