Welcome back to Cheddar news everyone, the U.
S. Propane market headed for Armageddon in this winter
. That was a warning recently issued by the research
firm I. H. S. Markit Residential propane
prices nationwide currently at their highest level since 2011.
And it comes amid soaring demand and as the energy
source is in short supply, well it could lead
to some regions experiencing shortages before winter ends and here
now to talk about how much of this will impact
businesses consumers. And the industry is Michael Stovall,
a president and Ceo of suburban propane, one of
the nation's biggest propane companies. Thanks so much for
coming on the show. So what is causing the
current issues that we see in this market? Well
, first of all, thanks for having me,
it's pleasure to be back on the show. Um
Yeah the main thing is through the summer we typically
see a significant building process for inventories in the United
States. It's it's sort of a typical lull uh
in demand. And so that's the time when we
start to see inventories build the head of the heating
season. Well, if you think back to the
the growth spurt that we've, we've, we've seen
in the economy globally over the last several months,
as we've been trying to recover coming out of the
pandemic uh that growth has, has spurred on significant
demand globally for propane and and actually the United States
has been a significant exporter of propane, particularly to
the asian markets uh And as GDP has expanded in
ASia. Um there's been a significant uptick in export
activity. So we haven't seen that typical build in
the inventories because we've been exporting Michael a lot more
than we typically would at this time of year.
So when consumers look at their bills this winter,
what prices should they expect? How much do you
think they might be hired by? Well, the
US Energy Information Administration has, has pegged about a
50 to 60% increase over last year is what a
good expectation could be And a lot that a lot
will depend ultimately on the severity of winter weather,
you know, So I think In your opening to
this segment, you indicated we haven't seen prices at
this level in October since 2011. And that's absolutely
true. The difference was in 2011, The winter
of 2011 and 12 ultimately was one of the warmest
on record. So prices abated fairly quickly in this
december january timeframe. So if the same occurs,
if we don't get the kind of winter that we
typically get for this time of year, then you
might see prices come back down a bit. But
if we go into a more normal winter or even
a winter similar as we saw last last year,
then I would expect to see prices to continue to
rise from here as supplies continue to be tight.
How should homeowners and businesses prepare for possible shortages,
Michael that we might see. Yeah, So a
couple of things that we're trying to do to help
our customers plan is, uh, one we're trying
to encourage them to think about. Um, there
, there needs earlier in the season. You know
, typically you don't really start to think about your
energy needs until you start to feel the winter weather
coming on. So starting to get ahead of that
, just to plan two, we offer automatic delivery
where we, we can predict when, when deliveries
are going to be necessary for propane and um,
and that allows for the consumer not to have to
really worry about making a phone call when they think
they need a delivery, which could be a,
a period of tightness in both supply and the ability
to get product when it's needed. Uh, and
then third were really encouraging our customers to contemplate being
on a budget payment program where they can smooth out
their energy costs on a monthly basis and to protect
and insulate there. The possibility for various spikes in
prices throughout the heating season. Here's another question for
you, Michael, I know new york city just
deciding not to renew an emergency order that did allow
these restaurants to use propane heaters for outdoor dining.
And even citing safety concerns in this decision, of
course, this will impact the ability for diners and
restaurants to get that outdoor business during the winter.
What do you make of this move? Well,
unfortunately, I think it's, it's misguided. I
think it's, it's generally what we see is propane
is, is a bit of a misunderstood commodity.
Um, it really is one of the cleanest burning
fossil fuels there is uh, it's very safe if
handled properly. And I think that even the,
the order that was put put out uh even even
admitted that there were no instances that they could point
to where propane creating a safety hazard. So,
uh, if handled properly, it's very safe,
very versatile. So it can be used in so
many different applications to support not only outdoor dining,
but outdoor living and uh, and so forth.
So, uh, I think it's very misguided and
uh, and really takes away something that is very
clean burning, very versatile, very safe and very
practical. Uh, and really did shine very well
throughout the pandemic in supporting all of the change in
the behavior of, of the way we had to
live for such a long period of time. And
Michael, you know, something that you said earlier
, I think is important, right? The more
weather changes that we get and that can impact obviously
the price of pro paid more. So we cover
the climate crisis. Uh, you know, sometimes
it leads to warmer temperatures. Sometimes it leads to
colder temperatures as the climate crisis continues. But the
world collectively works toward getting towards zero emissions. How
will that impact both the price and the supply of
propane? Well, it's interesting, you know,
I think, first of all we believe and I
think it's very supported that propane in its clean burning
qualities is a sustainable source of energy. And so
, and it's very easy to handle, portable,
very versatile and so it really can meet the standards
that um, that are being set to reduce carbon
emissions not only as a transition fuel as we get
to further renewable energy, but you know, as
a long term solution for cleaner energy. On top
of that, the industry itself and Suburban in particular
is innovating towards even cleaner versions of propane. So
today there's renewable propane which is produced from renewable sources
, which dramatically reduces the carbon intensity of propane,
which is already on the lower end of the carbon
intensity spectrum. In addition to that, Suburban is
innovating towards a blended product where we're capturing methane gas
from dairy farms, converting that into a renewable low
carbon fuel source called dimethyl ether. And when we
blend that with propane, We can actually achieve carbon
neutrality or zero emission uh, propane for the transportation
sector. And we're also going to be testing that
in all propane applications over the coming 12 to 18
months so that we can demonstrate that this cleaner version
of propane can be used in virtually every application that
uses propane today. So I think innovation is keeping
up with the desires to um reduced and appropriately so
reduce the overall carbon footprint. But I think if
we allow innovation to occur without having policies that ultimately
tipped the scale away from what some good sources of
energy that are very abundant today, right in our
backyard. I think we'll have a lot more opportunity
to get to our goals a lot faster. All
right, Michael Stovall, a president and Ceo of
suburban propane, Michael thanks so much for coming on
the show.