Some of us are old enough to have grown up on Mad magazine, the iconic Alfred E. Neuman and his tagline “What, me worry?”

Well, you do not need to worry about propane prices this winter because we have three products that can protect you from high winter prices.  “What high prices?” ask the naysayers. “2014 and propane shortages at any price are a distant vision in the rear view mirror.”  Well, if you are a Meatloaf fan and loved their 1994 song, “Objects in Review Mirror May Appear Closer than They Are,” maybe you have something.

However, we happen to think that this may be the year that the objects in the rear view mirror are much closer than they appear.  And while our stock picking and forecasting skills speak volumes about why we are writing blogs for a propane business instead of flying around with Warren Buffet on private jets, let’s take a look at some interesting visuals:

Source: Energy Information Administration

 

chart

Two visual messages we are picking up on.

First, the United States produces a whole lot more propane than it used to and with the widening of the Panama Canal and construction of larger propane container vessels producers have the capacity to export it.  (Hint: That means we are less likely to have supply gluts in future years like we did in the past two.)

Second, propane inventories in the United States are at their lowest level since the great shortage of 2014.  While inventories will continue to build as we march toward winter, there is concern that a wetter fall for grain-drying and a colder winter for residential heating will drive higher price-spikes than we have seen since winter 2013-2014.  Fortunately, the weather forecast is for an average winter.  Even luckier for all of us, the weather forecasters are almost always right. And we have some lovely Florida swampland we’d like to sell you.

Fortunately, we have three products to help you reduce your worries and fit your particular needs:

  • Pre-Buy.  Pay us a fixed price per gallon this summer and we’ll deliver that gas to you this winter at that fixed price.  Completely safe for you and for us, but don’t complain to us if, despite our worries, price increases do not materialize.

  • Pre-Buy Price Protection.  Pay us a fixed price per gallon this summer and we’ll deliver that gas to you this winter at the lower of the fixed price or our market price plus about $0.12/g.  By the way, this does not represent a mark-up.  If you buy this product we buy the corresponding product from our wholesalers, and it costs about $0.12/g.  Your bet, should you decide to make it, is that our market prices will be at least $0.12/g lower than the Pre-Buy fixed price.  Depending on market conditions and your usage patterns, that could be a good bet.

  • Price-Cap Protection.  Pay us an up-front fee if you own your tank, or get coverage free from us if you lease your tank.  In either case, you will pay the lower of our market price or the cap price at the time of delivery.

Of course, you’re probably wondering about pricing.  So are we.  We are in the process of finalizing agreements with our wholesalers and assessing market conditions.  We hope to have prices out soon – perhaps within the next week.  In the meantime, we wanted to share our outlook on prices for this winter and the structure of our price protection products.

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