Balancing propane supply and demand

January 26, 2021
Energy supply analyst, Tyler Kelly, discusses how co-ops are balancing propane supply and demand for customers in 2021.

Changes to energy use during the global pandemic are being felt in the propane market. Tyler Kelly, energy supply analysis lead for CHS, is optimistic about balancing U.S. supply and demand heading into 2021.

“The global pandemic caused propane supply disruptions in mid-2020. That was really related to the loss of demand for other petroleum products — transport fuels, gasoline and diesel — that forced crude oil drilling to slow down or cease altogether. Fast forward to today, and we’ve returned to pre-COVID levels of propane production and near-record levels for the United States. Thanks to that quick recovery, supplies of propane are more than adequate and well within normal ranges for this time of year,” explains Kelly.

“With that high level of propane production comes an ever-increasing supply that needs to be cleared. Since mild winter weather has kept domestic demand low, propane producers have needed to find new demand outlets,” says Kelly. “Timely infrastructure investments — mainly new pipelines and export terminals — have allowed for a spike in exports in order to keep prices in check. However, this increased correlation between U.S. prices and the global marketplace, coupled with cool temperatures forecast for the Midwest and Great Plains regions, means a sudden increase in demand in one area could easily affect supply and price in others.”

Kelly recommends that propane customers continue to work with their retailers to ensure they have the appropriate amount of storage, the right price management and effective marketing plans to cover annual needs. “Be sure any changes to your plan and your anticipated needs are communicated to your retailer so there is time to react and enable a successful, worry-free season for you.”