Westlark Talks Price Protection at MPGA Summer Convention
The MPGA’s (Michigan Propane Gas Association) Summer Convention was held July 23-25, 2025, at the beautiful Boyne Mountain Resort in Boyne Falls, Michigan. Westlark Advisors was invited to speak at one of the sessions. Westlark President, JD Buss, spoke about the impact that exports and international activity have on North American propane prices and the importance of price protection.
Today’s post will present some of the highlights from that session.
BE READY – To Price Protect!
Most North American propane distributors offer some type of client pricing program. Usual programs include Prebuy, Cap, Budget, or some other arrangement. These programs are designed to offer a sense of security for both the client and the distributor.
The issue comes when prices change.
Exports Changed Everything!
Why do prices change? One reason is exports.
Over the last decade, propane exports have averaged a 1:1 ratio. Also, during the last decade, export volume has increased every single year.
Exports have achieved two things that match almost perfectly with current production trends:
- They move out at the same rate as production. The propane moves out of the United States at the same rate during summer and winter.
- Exports are growing every single year. This is a bonus for producers, since exports are growing at a faster pace than production.
The fact that exports are moving out of the U.S. at the same rate over summer and winter, combined with the fact that the rate of exports is growing every year, are things that the domestic market can neither provide nor compete with.
Bottom Line:
Global Markets drive exports and exports drive U.S. prices.
Price Changes Over Time
- What is the lowest (or second lowest) priced month of the calendar year? For the past decade, 11 out of 12 calendar months have seen a low or second lowest price point during a calendar year. Additionally, a low or second lowest price point has been split almost 50/50 with occurrences in either summer or winter.
- Is the lowest (or second lowest) priced month of the year the best time to buy price protection? It can be, but you must consider the context and history. September 2024 was the lowest priced month for 2024 and was an outlier for the past 20+ years. Before 2024, September had not been a low or second lowest priced month.
Look at the Whole Picture
Why does this matter? Because in the prior decade (2005 – 2014) we saw most of the low and second lowest priced months of the year occurring during winter. The evolution of the export markets has changed pricing patterns over the last decade. And we have three separate instances that show this.
How Do International Events Affect Prices?
What happened in September 2024?
September 26, 2024 OPIS Report: “Though unverified, multiple sources said the 700,000 b/d Nederland facility, operated by Energy Transfer, could be offline for up to two weeks for maintenance.”
October 10, 2024 OPIS Report: “News of a force majeure at Energy Transfer’s NGL export complex in Nederland, Texas, was a proximate factor behind declines of more than 3.5% in Mont Belvieu propane.”
Traders knew early in the month that something was amiss and took action by selling. Why? Anytime an export facility is unable to operate, that means product will build up in storage facilities. Nederland is a large export facility and with this going down in September 2024, prices moved lower due to more volume going into storage.
Other Examples of International Factors Driving U.S. Propane Prices
- 2023 – Summer:
- Front month prices dipped to almost $.50/gallon, a loss of $.70/gallon from the previous year’s high. This drop in price was due to a reduced number of vessels moving through the Panama Canal. That reduction forced more traffic into the Suez Canal, leading to longer trip times overall.
- 2020 – COVID:
- Global demand decreased rapidly, causing propane prices to drop to the lowest level in years. However, COVID then created a pent-up demand bubble that drove prices radically higher in late 2021 through 2022.
These examples demonstrate that international events impact U.S. propane prices. This impact is real and is changing the opportunities to price-protect distributors’ program offerings.
Things to Watch When Buying Price Protection
Watch
- International arbitrage values
- International freight costs
- Domestic secondary market costs to load vessels
- Changes in international logistical movements
- For cold weather . . . in OTHER nations!
Conclusion
Exports have changed the pricing world for North American propane. There is a new market requirement to – BE READY at any, and all, times to price protect! Tracking international activity is vital to understanding North American prices.
Westlark Talks Price Protection at MPGA Summer Convention
By JD Buss
