Are you prepared for winter?
Warm Coat? Check ☑ Snowblower working? Check ☑ Plenty of propane supply . . . ?
Winter brings cold weather which in turn helps bring propane demand. As we close out the summer and look forward to dropping temperatures, we want to review three important items that can help a propane retailer be prepared for this winter.
Solid Supply Planning
With propane inventory levels in the U.S. about to reach, and possibly surpass, record high levels, propane supply doesn’t seem quite as important. But most of that supply is a long way from where everyone may need it. Which means some of these “tried-and-true” items should still be considered:
- Is your supply diversified among suppliers, terminals, and origin locations? One of the most common things we hear is, “I have several different suppliers,” but they all provide product from the same terminal.
- Do you have commitments from your transportation firm? While not as common, we advocate for retailers to make volume commitments with hauling companies to help both companies plan better for winter.
- What are your supply options IF your local supply fails? “Proper planning prevents poor performance” is an often-used phrase that can help in a time of emergency.
Watch International Markets
Besides the “tried-and-true” supply items, we recommend propane retailers know what is happening in international markets. Over the last decade North America has become the world’s leading exporter of propane. Export volume has surpassed domestic demand. Knowing how and when international prices change will be an early indicator of price changes in the United States and Canada.
Two main indicators can help track international markets. Weekly Energy Information Administration (EIA) data provides information on propane exports. Tracking those and the monthly recap data from the EIA will allow you to track volume movements. Each day the Westlark Advisors team provides a price difference between two major international propane price indexes and the main U.S. price point – Mont Belvieu, Texas. Watching volume and price movements will help give you an edge on the international markets.
Keep an Eye on Cold Weather Outside of North America
Does cold weather matter? Ask any retailer in North America and they are likely to answer, “Yes”. Cold weather is vital, but it is actually more important in other continents, particularly Europe and Asia.
Because North America is the global export leader for propane, colder temperatures in Southeast Asia (China, Japan, Korea) and in Northwest Europe drive international demand. The U.S. could have a very cold winter but if both Europe and Asia are warm, propane prices could remain low. Increase the heating demand in Asia and Europe and we see this situation flip.
Before saying you are fully prepared for winter, make sure to check these three major categories:
- Solid supply planning
- International volume and price changes
- Cold weather predictions outside of North America
Check these off, and then you are prepared for winter!
Are you prepared for winter?
By JD Buss
