The natural gas boom and climate change that saw a milder winter and lower demand for propane and resultant over-supply have all helped to bring down propane prices, but the average pocketbook is not likely to benefit much from this without a concerted effort that recognizes the negotiating power of a unified consumer base.
Where propane is concerned, the American consumer has a massive power base around which to organize. Propane, a by-product of natural gas processing and petroleum refining, boasts some 14,300,000 residential users in the United States and an estimated 6,880,000 households heat with propane. To that one can add another 47,000,000 American grills fired up with propane during the summer months.
This past winter was warmer than usual in North America, resulting in the largest decline in propane demand among US consumers in years and an estimated 20 million bbl surplus which will affect markets and pricing for the rest of 2012. What experts refer to as “heating-degree” days – the critical winter days when consumers use propane to heat their homes – were up to 33% fewer in December 2011 and January 2012 than in the previous year for customers in America’s upper Midwest and Northeast.
The propane market is slowest from May through July in terms of consumption and restocking sales to smaller retailers and consumers. This is when the prices are at their lowest, and also when wholesalers and larger retailers swarm on supplies to fill their inventory for the subsequent winter’s demand.
This year has been different, however. Lower demand over the “critical” heating months and the resultant oversupply has reduced incentives for wholesalers and larger retailers to rush on the cheaper May-July prices to restock their inventories. Inventories are already stocked.
But this is the supply-side of the equation. What consumers want to know is how lower prices are trickling down to affect their own massive propane bills. If you are already a consumer of propane, you are not likely to benefit from lower prices unless you demand such.