The US propane market is preparing for a possible “Armageddon” heading into the winter months, according to a recent article by Bloomberg. NPGA reports that propane spot prices have recently been at their highest levels since February 2014. This fall’s high prices are being attributed to low inventories resulting from increased global demand, relatively flat US propane production, and less global propane production due to limited oil supplies.
What does this Mean for Fuel Marketers?
Not only do you need to be prepared to withstand supply shortages, you should also be prepared to time the market and buy new inventory when the opportunity strikes. Propane prices are in constant flux, and when the wholesale price hits a new low, it’s time to make your move.
The question is, where will you put that new LP? Is there enough room in your storage tank to accept a new shipment? If you monitor your bulk tanks, you can instantly see how much space is available without having to drive out out to the tank. If your bulk tank is full though, how can you offload existing inventory?
One long-term solution is to invest in an additional storage tank. However, now that we are in the midst of a global steel shortage, tank prices are through the roof and lead times on installation extend well into the next year.
A “Virtual Storage Tank” to Make Room for New Inventory
Add a virtual storage tank to your fleet by using tank monitors to extend your storage to all of your customers’ tanks. Tank monitors enable you to see exactly how much capacity is out in the field for you to drop gallons, free up space in your bulk tank and optimize your fuel purchasing strategy. Tank Utility’s solution uniquely enables you to do this through:
An effective way to make space in your bulk tank is to use tank monitors to see exactly how much storage capacity is available (ullage) for existing inventory in your customer tanks. Sorting customers based on ullage enables you to get a quick snapshot of which tanks have room to drop the most gallons, thereby freeing up storage space in your bulk tank.
Ullage shows you where drivers should prioritize deliveries to make room in the storage tank based on empty capacity in tanks right now.
By looking at Ullage in Tank Utility’s Schedule View, you can understand which tanks to focus on that week. In this snapshot from a fuel marketer’s Portal, you can see that they are able to drop 3,888 gallons in 27 deliveries over the course of the week. By toggling to the next week, your drivers can get a head start on filling those tanks too.
In this way, tank monitors act as a “virtual storage tank”, helping you move inventory and take advantage of low prices as soon as they hit. Having this flexibility to time the market makes your operations more profitable, and keeps your customers’ wallets happier as well.
Short-Filling Tanks in a Shortage
In addition to price hikes, the 2021-2022 heating season brings with it a strong likelihood that we will experience propane shortages due to increased demand and supply chain delays. Even if external factors aren’t at play, you may decide to wait until there’s a dip in the market to buy inventory, rendering you short on supply. Tank monitors can help you get the most mileage out of your existing inventory by short-filling tanks until your stockpile is back up.
While sorting by tank percentage in your portal’s device list helps you identify which tanks are low, it doesn’t take urgency into account. Just because a tank is at 30%, for example, doesn’t mean it’s urgent to fill. By adding Estimated Fill Date into the Device List and sorting on that, you take the current tank level and usage into account to make an efficient delivery. This helps you quickly understand delivery urgency by doing the math for you right in the Portal. With Estimated Fill Dates, you can understand which customers need deliveries and when, all while optimizing your purchasing and inventory strategy in uncertain times.
Factor Tank Utility into Your Inventory Management Plan
A colder-than-normal winter could result in tough market conditions for propane marketers and their customers who rely on LP gas to heat their homes and power their appliances. Reach out to our team today to learn how we can help you profitably manage your inventory no matter what happens this heating season.