Surge in propane supply doesn’t eliminate risks in logistics

November 18, 2024 By    

We at LP Gas magazine are about one month from releasing our annual State of the Industry report.

Our year-end report in the December issue gives us a chance to look at the big picture of the propane industry. As we examine some of the trends shaping the industry over the past 15 years – the topic of this year’s report – the surge in domestic propane supplies no doubt ranks among the top.

This development stems from the shale oil and gas production boom, beginning around 2007. Advancements in hydraulic fracturing techniques helped unlock vast natural gas liquids reserves in the nation’s shale plays and transform the U.S. propane industry from a net importer of propane into the world’s largest producer and a net global exporter (beginning in 2011). We’ve known for some time that U.S. propane is linked to the global market, and today it’s sending about two-thirds of that production to international destinations.

Since 2011, the U.S. has been a net exporter of propane. (Photo: think4photop/iStock / Getty Images Plus/Getty Images)
Since 2011, the U.S. has been a net exporter of propane. (Photo: think4photop/iStock / Getty Images Plus/Getty Images)

That change to our identity and role on a global scale also has changed the mentality of the U.S. propane industry, especially entering the winter heating season. Now, it’s not uncommon for the U.S. Energy Information Administration (EIA) to report 100 million barrels of propane inventory before the snow begins to fly. This year, that total reached a record 103 million barrels, though the total available to the domestic market (or ready for sale) was closer to 70 million barrels, information we now know thanks to a new dataset from the EIA.

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. (Source: U.S. Energy Information Administration)
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. (Source: U.S. Energy Information Administration)

But we weren’t always awash in propane, as Pat Hyland recalls.

“If anybody has been around long enough to remember those days, please raise your hand so I know I’m not the only one,” the former editor of LP Gas said as a guest speaker at this year’s LP Gas Growth Summit.

Those times were tough for propane retailers to navigate, Hyland says. In late summer, retailers would begin to wonder about the rate of propane stock builds. Then, they’d wonder: What if it’s a wet fall harvest? What if it’s a cold winter?

“All of that impacted price, all of that impacted availability of product to your end customers,” he says. “It was really tough sledding.”

Hyland calls the U.S. shale oil and gas boom, and the accompanying growth in propane supply, one of the most dramatic changes ever for the industry.

“Gone is the desperate reliance on imports and slow summer stock builds ahead of peak season demand,” he says. “The simple flip of the switch in terms of supply has mitigated all of that.”

And, in the process, the change in market dynamics has stabilized the propane pricing environment and moved the industry away from the fluctuations it used to experience.

The 2007 shale oil and gas boom turned the U.S. into a net propane exporter. (Photo: grandriver/iStock / Getty Images Plus/Getty Images)
The shale oil and gas boom turned the U.S. into a net propane exporter. (Photo: grandriver/iStock / Getty Images Plus/Getty Images)

Risks in logistics

With about 100 million barrels in propane storage entering a winter heating season today, there’s seemingly little to worry retailers, right?

Tucker Perkins, president and CEO of the Propane Education & Research Council, wants the industry to think again.

“The problem still exists – and one that we can never let down our guard – is the fact that most of that [propane] is in Texas,” Perkins says. “It’s finding its way to Mont Belvieu. We have pockets in the Dakotas, pockets in the Marcellus.”

Ultimately, Perkins says, the success of the propane industry will continue to depend on the logistics network – rail cars, trucks and pipelines – to deliver in peak periods.

“We can never let our guard down,” Perkins echoes. “We saw in ’13-14 how easy it is to get behind if nature throws you one curve or even two. That particular year, I remember a rapid expansion of wet crops and then tremendous degree-days in the early winter. 

“So for me, it’s always super relevant to encourage propane marketers to be on top of their customers’ tanks and their own tanks as we go into winter.”

About the Author:

Brian Richesson is the editor in chief of LP Gas Magazine. Contact him at brichesson@northcoastmedia.net or 216-706-3748.

Comments are currently closed.