Steps to navigate the 2021-22 winter

As recently as mid-November, propane marketers were right to be concerned about the 2021-22 winter.

John Powell

Readily available supply was questionable and prices were heading toward record highs. In fact, a late October Wall Street Journal article reported that – of all types of heating fuel – propane was “expected to take the biggest bite out of household budgets.”

Fast-forward to December: Although prices are still 50 percent higher than they were this time last year, as of this writing they have dropped to nearly $1/gallon, nearly one-third from their recent highs; supply is nearing normal levels; and a warm winter is now anticipated.

By now, we’re all getting used to this roller coaster ride. As a propane marketer, you recognize the entire world has been playing catch-up on energy inventories as global demand returns to 2019 levels. And the U.S. is helping to supply that demand.

Despite higher prices, lower-than-normal inventories and continued LPG exports to Europe and Asia, there doesn’t appear to be a concern about an overall propane shortage this winter.

We believe there is plenty of inventory in PADD 1 (East Coast) and PADD 2 (Midwest), as they are close to the five-year averages. PADD 3 (Gulf Coast) – as is often the case – appears to be the one section of the country where supply constraints could happen, especially if exports pick up over the coming months. Mont Belvieu propane inventories are 20 million barrels behind the last two years, which is slightly below the five-year average.

As for prices, although they’ve come down from the recent highs seen just a few weeks ago, consumers will still pay more for propane than they have in many years.

Plan ahead

As a propane marketer, how should you plan for the coming winter months? Here are my suggestions:

• Keep your eye on exports. Europe and Asia have been in a deep freeze in recent months. Should that weather pattern hold, the U.S. will continue to export propane to meet their demand. That could drive up prices even further, as well as cause constraints in some parts of the U.S., especially during December and January.
• Schedule your loads in advance … at least a week ahead. Ratable liftings will be necessary since transportation will remain tight; you’ll need to keep a close eye on your tank inventories. If you have the option to take a load, take it. It may not be there later if you don’t. Confirm your disposition (dispatch) in the morning. If you wait until the end of the day to schedule your next delivery, you will likely be out of trucking capacity for the day.
• Keep all of your tanks full … not just your bulk storage tanks but your homeowner tanks, too. Let customers know you’ll be topping off their tanks to ensure they have an adequate supply before any cold snap or transportation issues cause concern.
• Communicate with your employees and customers. Keep everyone informed as to what’s happening in the energy markets overall, as well as specifically to propane. Your customers can better understand paying more for their propane when they see how much more they’re also paying at the gas pump.

The bottom line?

First, there should be enough propane this winter to meet everyone’s needs. You may not like the price you pay if exports pick up significantly, but there should be adequate supply.

Second, given the tight transportation issues, “just-in-time” propane will be extremely difficult to procure, so stay ratable and stay full. Even if a colder-than-normal winter doesn’t materialize, finding enough transportation for your propane supply could be a challenge. Plan as far in advance as you can.

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.