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Call Cost Management Solutions today at 888-441-3338 for more information about how Client Services can enhance your business or drop us an email at

Trader's Corner

This week’s Trader’s Corner explains the importance of everyone in the propane supply chain working together to meet consumer needs.

Every propane retailer understands the value of having good, dependable suppliers of their physical or wet barrels. Perhaps there is no greater risk to our business than being without physical supply at a critical point during the winter demand period.

Many propane retailers and their wholesale suppliers have spent years cultivating a mutually beneficial relationship. Both are part of a contiguous supply chain. In the best supplier/retailer relationships, both parties look beyond the immediate connection between them to points further up and further down the supply chain.

On the one hand, it is important for the retailer to look up the supply chain, trying to understand the challenges his wholesaler or producer face in doing their job. A retailer might be surprised just how far a little empathy for and loyalty to their supplier goes.

We used to manage propane supply for refiners as a wholesaler. Refineries often have limited storage for their propane production, so it must be moved out on a regular basis. When demand would get slow, keeping the refinery “dry” was always a challenge.

When storage was getting full, we would start calling retailers, asking them if they could take a transport load of supply. Of course, most retailers and brokers knew when they got this call that we needed to move propane and they immediately started beating us up on the price. There would be some comment like, “So you got a fire sale going.”

Many times a wholesaler agrees to buy propane from a refinery or other producer at a set rate, often related to Conway or Belvieu. The potential margins a wholesaler can make are often thin. It was not unusual for a wholesaler to pay a refiner more in certain times of the year than what the local market would bear. It is hard to appreciate someone that is making your no-win situation even worse.

In contrast to the attitude of many of the customers we would call, one retailer in particular stood out as being different. This retailer was in Illinois and his name was Jerry. When we would call Jerry and say that we needed to make room in the cavern, he would never ask the price. He would simply ask for a minute to check his locations’ inventory levels.

He did not see the call as an opportunity to take advantage of his supplier. Rather he saw it as an opportunity to help his supplier. Not once in the conversation would he ask the price. He trusted we would treat him fairly and he was right. When supplies got tight, you can guess who was always at the top of the list to get any discretionary loads available. Working with Jerry was so refreshing, so different, that you couldn’t help but want to help him in any way.

Of course, the supply chain moves a step downstream, past the retailer, as well. It stops with the end user, who will turn on a stove or fire up a piece of industrial equipment that will consume and create demand for the product we sell.

It is important that suppliers understand the health of our industry and our ability to maximize the value along the supply chain. From producer to supplier to retailer, this means understanding and meeting the specific needs of end-use customers.

Every retailer has had relationships with suppliers that were fairly inflexible in what they offered to customers. Often these suppliers have some strategic advantage that gives them the upper hand. Unfortunately this can cause them to forget that the propane they produce or control is worthless if it is not meeting consumer needs.

While an end user may not have much choice in the supply of propane he consumes, he often has a choice of energy sources. A supplier that understands the retailer’s role of meeting customer needs and works with him to meet those needs is deeply valued and appreciated.

A supplier that listens to a retailer in meeting the needs of customers and works with them to meet those needs is to be greatly commended. These suppliers certainly deserve our loyalty. When a producer, supplier and retailer are all focused on the end-use customer, it can be a truly beautiful thing. Ultimately all will benefit from increasing the demand for the product they supply.

Our company, Cost Management Solutions, is not a physical supplier of propane. We do not own storage, trucks or other transportation assets. We do not own wells, refineries or natural gas processing plants. Our focus is to help everyone stay informed about what is driving the price of propane and identify a fair value for propane in the marketplace.

We also help retailers use financial hedging tools, such as swaps and options, to meet specific needs of end-use customers and to protect retailer margins. We know from experience this process works well when the retailer has a physical supplier that will design supply contracts in a way that makes using these tools easier. One example is suppliers that will sell to customers based on an indexed price relative to Belvieu or Conway. This helps the retailer use what we call “clean hedges,” which allow him to do a better job of protecting margins and meeting customer needs.

Next month we will have a hedging workshop that will help educate retailers on market trends and hedging tools that will allow them to be the best energy choice for their customers. We know that after the retailer learns these skills his challenges are just beginning. He must forge relationships with his suppliers that allow him to use these tools and he must educate his customers on how the programs developed from these tools will benefit them.

Call Cost Management Solutions today at 888-441-3338 for more information about how Client Services can enhance your business, or drop us an email at

Strong U.S. economic data and supply issues in the Middle East kept crude moving up sharply.

Propane got enough fundamental support to follow crude higher.

We went bearish in the middle of the week because we thought crude was getting overdone. However, we pulled back to neutral as market momentum kept working against us.

Monday: The continued string of good economic data from the U.S. kept crude moving higher. Propane also kept its upward momentum intact, with the previous week’s more bullish inventory data helping.

Tuesday: West Texas Intermediate set a new closing high for the year at $99.60 as U.S. economic data and supply disruptions encouraged buying. Propane followed crude higher.

Wednesday: It was a bullish Energy Information Administration report for crude with a 10.3-million-barrel draw on inventory. Gulf Coast inventory only built about a tenth of what it normally does during the 26th week of the year, which caused Belvieu propane to gain 2 percent.

Thursday: Markets closed for July 4.

Friday: A positive U.S. jobs report and the forced removal of Egypt’s president from power by military leaders kept crude moving up strongly, setting a new closing high of $103.22. Propane continued to let crude drag it higher.

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Cost Management Solutions LLC (CMS) is a firm dedicated to the analysis of the energy markets for the propane marketplace. Since we are not a supplier of propane, you can be assured our focus is to provide an unbiased analysis.

Market Information Services
The Propane Price Insider, an e-mail service that provides:

  • Three Daily Price Flash Wires
  • Periodic Option Quotes
  • Wednesday Inventory Data Updates around 11 a.m. ET
  • Evening Report with Executive Summary, Trader's/Hedger's Corner, Weather maps and complete review of energy prices that are based on Propane's Btu Equivalent

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For a free 10-day trial subscription by e-mail, sign up online here or call toll-free at 888-441-3338.

Client Services
Many retailers simply don't have time to analyze the large amounts of data to make an informed purchasing decision.

We offer:

  • Detailed market recommendations on hedge and pre-buy entry points
  • Prompt market execution of hedging strategies
  • Supply cost analysis and recommendation as to effective hedging strategies
  • Because of the volume of transactions we place annually, we receive large volume consideration when we place your hedges

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Contact us today to see if you can benefit from having the Energy Price Watchdog working for you.

Dale G. Delay 888-441-3338,
Mark Rachal  318-865-9928,

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LP Gas Magazine

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