Lessons Learned from 2020
June 7, 2021
Written By Tim Danze
The coronavirus pandemic turned our lives upside down. Everyone was affected in some fashion. Now that we hopefully see some light at the end of the tunnel, it’s worth looking back to see what we can learn from the experience.
My biggest takeaway is to take nothing for granted, especially the simple things. Being able to speak with people in person, shake someone’s hand and hug our friends and family are things we’ve all learned to appreciate better.
From a commodities and energy perspective, there were two major forces at play in the past 12 months: the pandemic and the polar vortex. The lockdowns aimed at preventing the spread of the virus killed energy demand, and the frigid temperatures ushered in by the Arctic winds stalled domestic production.
Last year was a perfect example of how prices can change drastically in a hurry. In January 2020, prices on the New York Mercantile Exchange for gasoline futures were at $1.65. By March 23, they had dropped to the COVID-19 low of $0.3760. Prices rebounded from there with steady increases until mid-June 2020 ending in the $1.20 area. Fuel prices traded sideways into the end of the year and have been on another gradual climb to get us to our current price level of around $2.00. Propane prices followed a similar path until the arrival of the polar vortex.
In February, the big freeze brought a majority of the oil and gas production in the United States to a standstill and created a massive surge in demand for propane. Most oil and gas refineries and several utility companies, especially those on the Texas energy grid, could not maintain operations during the historic freeze.
Keep Your Tanks Full
One of the best ways to protect yourself from wild swings in prices like we saw in 2020 is to keep your tanks as full as you can. It’s tough to drive your car or heat your home if you don’t have fuel in your tank. Or, in our case, you cannot sell it if you do not have it. Lumber prices have gone nuts in the last several months, and I heard a lumber buyer say that you want to have it right now no matter what it costs. These are interesting times for sure. Having the product in your hands or your tanks offers security regardless of the price. That’s worth remembering when everyone hopes to hit a home run and buy at the lowest possible price of the year. Timing the market is exceptionally challenging and requires more luck than skill. The better bet is to keep your tank full.
Contract What You Can
We are currently accepting contracts on this coming winter’s propane through our Pre-Buy Program. Historically speaking, this program has proven to be a winning strategy. Look back at how much propane you used last year or what you’ve traditionally needed to get through winter. Knowing this information can help you book a contract for the winter of 2021-22.
I would encourage you to look into signing up for our Auto-Fill program or requesting that your local office put you on a regular route. Taking these steps will have you well prepared, no matter what happens with the weather. People sometimes ask me if propane prices could be lower in winter than in the spring and summer. While that’s certainly possible, trends from the past suggest it’s unlikely. More often than not, contracting now will work out in your favor, especially if we see another winter like we did this past year. No one likes getting stuck with an unexpectedly high bill.
My advice for navigating the ups and downs of fuel pricing is essentially the same. History has shown that buying a percentage of your yearly fuel needs with a Pre-Buy contract is generally a good idea. Again, we don’t have a crystal ball that can guarantee your contracts will secure the lowest prices, but if you stick to this plan, you will likely come out ahead. And when we do run into years with allocation issues or low supplies, a contract offers outstanding protection against volatile swings in the market.