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MARKET INSIGHTS FROM

LAST WEEK'S TOPIC: PROPANE PRICES

Calling on winter propane demand

Back in the day, there was a television series called “Highway Patrol.” It starred Broderick Crawford and was an action crime drama series produced between 1955 and 1959. The radio dispatcher would often get on the radio and say, “Calling all cars, calling all cars, be on the lookout for a blue sedan license plate ABC123.” The “calling on all cars” part became kind of the trademark for the show.

We were thinking about U.S. domestic propane demand and that call-out came to mind: “Calling all propane retailers, calling all propane retailers, be on the lookout for winter. It went missing about three years ago and has not been seen since. Be aware it may not be easily recognizable and could catch you off guard.”

Please don’t imply anything about the quality of our life because we sit around thinking about U.S. domestic propane demand and a television show that aired 66 years ago.

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U.S. domestic propane demand has been downright criminal over the past few years, worthy of the “calling all propane dealers” transmission. Yes, the resulting low prices stemming from weak demand have been nice, but we long for the days of lots of propane flowing through cold hard steel.

We kind of miss the adrenaline rush of wondering if we will have enough supply to make it through winter, bobtail drivers going Mach 3 with their hair on fire trying to keep up. Is it wrong to want a little thrill back in this game? Is it selfish to want to see a little more volume going through all of those tanks the industry has been setting? The return on capital employed at 5 gallons of throughput per winter fails to get us into the holiday spirit.

You can call us whiners if you want, but consider this: In 2022, domestic propane demand averaged 119,000 barrels per day (bpd) less than it did in 2021. Just when you think it can’t be any worse, demand this year has averaged 140,000 bpd less than it did in 2022. The next couple of weeks aren’t going to change that much. It is liable to get worse based on the weather forecasts.

Do you have employees asking to be reminded of what business you are in? If it weren’t for mercaptan, there would be a far worse stench permeating everything right now.

Consider these numbers: 140,000 bpd multiplied by 365 days a year equals 51.1 million barrels or more than 2.1 billion gallons of propane. That is about 670,000 bobtail loads of propane that did not merrily roll out to await customers this year. That follows a drop of 570,000 bobtail loads in 2022. Keep reading...

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Cost Management Solutions LLC (CMS) is a firm dedicated to the unbiased analysis of the energy markets for the propane industry.

Mark Rachal, Director of Research and Publications at CMS, regularly provides insightful looks into various facets of the marketplace.