Are You Prepared for Winter?
November 4, 2017
Written By Tim Danze
A hint of a chill has returned to remind us fall has arrived and will soon be followed by winter. What does Mother Nature have in store for us this year? It is hard to predict the weather, but that doesn’t stop people from making predictions. Meteorologists have already begun releasing their winter outlooks. What can we take from these outlooks, and what does it mean with respect to propane?
First, let’s review the supply situation. As of late August, the United States had a total of 73.5 million barrels of propane in its inventory. That’s roughly 25 million barrels less than we had stockpiled at this point last year. In the Midwest, the situation looks similar, with an inventory of about 23 million barrels, which is 5.7 million barrels behind las year. These numbers are a concern for market and industry experts, who generally would prefer to see around 100 million barrels in storage by the end of September. With only a few weeks left before demand starts to kick up, it appears unlikely we get anywhere near an inventory of 100 million barrels of propane.
Now, let’s consider the demand side. Besides cold weather, the other factors which could significantly affect demand are grain drying and exports. As of late September, there appears to be ample supply to handle farmers’ crop-drying demand. However, if the nation’s corn harvest falls behind schedule, it could mean more propane will be needed to dry it down for storage. Meanwhile, propane exports were temporarily stopped by Hurricane Harvey, and it remains unclear how the export market will respond to the disruption.
Most of the weather outlooks for this winter have forecast normal to above-average temperatures. A few recent projections have called for colder temperatures in the key winter months of December, January and February. Colder weather creates more demand, and some propane industry experts are concerned that stronger demand, coupled with our lower inventory situation, could push propane prices higher.
Only four years ago, most Midwest propane suppliers were dealing with high demand and propane shortages. I hope our MFA Oil propane customers remember how we took care of them during this crisis. We honored our contract agreements while many of our competitors would not. We rationed our propane supplies to make sure all our customers had product while a few of our competitors decided to temporarily go out of business. MFA Oil even sent trucks to Texas and Mississippi to bring propane back to our customers.
We make agreements with our suppliers to purchase volumes year-round, and in return, we are awarded volumes during allocations (shortages). Some competitors just buy from the rack each day, leaving them with no security or guaranteed supply when things get tight. Additionally, MFA Oil leases underground storage in Kansas and Texas and can store a few weeks’ worth of propane sales in the winter. This means we have access to propane when shortage situations occur. If you are not a MFA Oil propane customer, I would encourage you to ask your supplier if they do these things for you!
Bottom line, if you are not on a route with MFA Oil, please call us and get your tank filled today and sign up for our Auto-Fill program. No one can predict the future, but if you do these things, you can rest easy knowing we will take care of your propane needs no matter what winter may bring.