Preparing for Winter
Excellence Is Our Mindset. And Experience Takes Time.
Johann Sebastian Bach wrote the Goldberg Variations in 1741. The piece contains 30 variations, plus an opening and closing aria. The Canadian pianist, Glenn Gould, first recorded the Goldberg Variations in 1955, and then again in 1981, the year before he died.
About 20 years ago, I gave the 1981 recording to my father, Lonny Heffron, former president of the Sea-3 marine terminal in Newington, NH. I remember him saying, “What’s that sound? Is he humming? I don’t like it.”
It’s funny because I think Glenn Gould’s humming is part of what makes the recording so extraordinary. After a lifetime of preparation, hard work, and experience, Gould (like Bach) was at the peak of his interpretive abilities. The closing aria, “Aria da capo”, with its excruciatingly slow tempo (twice the time as the first recording), could only happen after three decades of experience.
Something done well transcends itself - is similar to all things that can be done well.
"Winter Frost for Summer Use"
About the same year that Glenn Gould was born (1932), J. Kenneth Ray and his father, John Ray, were executing a supply plan. “Winter Frost for Summer Use” was their slogan. They would harvest ice from the Hudson River, and then direct the cut ice into a channel to the shore where horses and chain fall hoists (come-along winches) would pull the ice up a ramp and onto sleighs or wagons. A lot of planning, preparation, and hard work went into their business venture, long before the seemingly simple act of delivering ice from door to door could be accomplished.
They weren’t writing or performing music, but they worked hard at their craft, were dedicated to excellence, and their customers received an exceptional level of service. Ken Ray represents the 3rd generation, and he’s cut from the same cloth; a lifetime of experience dedicated to exceeding a customer’s expectations and delivering exceptional service.
Price Forecast
Back in July I wrote: “With plenty of propane on hand, and based strictly on fundamentals, the price of propane should stay fairly stable”.
- U.S. inventory levels now stand at 101 million bbls. (40% above the 5 year average).
- Canadian inventory levels are ahead of the 5-year average (approaching 2015 levels).
The price at Mt. Belvieu, TX, has been largely range-bound between .45 and .50 cpg, so I don’t see our forecast for stable pricing changing yet. There are no storm clouds on the horizon, but you’ll be the first to know when we see them – along with a suggested course of action.
Production and Exports
- U.S. propane production is up about 10% from last year (1.73 mmbbls./day versus 1.57 mmbbls./day).
- U.S. propane exports dropped sharply last week, down over 25% to 503,000 bbls./day. This is almost certainly storm-related, but the bigger picture is that buying interest from Asia has weakened (for the moment). This is partly due to softer international petrochemical demand and mostly due to greater competition from the Middle East. But this can change very quickly.
By the Way, What is Fractionation?
While we’re speaking of propane production, a customer from Massachusetts asked me the other day about fractionation. Basically, fractionation is the process of separating natural gas liquids (ethane, propane, butane) from the “wet” or raw natural gas. The different NGLs pass through distillation towers and are separated based on their different boiling points (the temperature at which a liquid boils and turns into a vapor). The boiling point for propane is about 44 degrees below zero.
Suggested Reading
Anthony Fensom wrote an excellent article in the National Interest last month which detailed how America is smashing Russia and OPEC’s grip on the oil and energy markets and how new shale extraction cost-cutting measures (born of necessity) have helped the U.S. achieve all-time high production levels.
New shale extraction cost-saving measures (in one case, as low as $2.25 bbl.) have helped the U.S. become a global leader in energy exports and armed us for the “market share” war which is under way. To share one example: LNG was recently exported from Cheniere Energy’s Sabine Pass plant in Louisiana to Kuwait. That’s pretty remarkable!
This is such a great, informative article that a number of industry experts and sources have been quoting it for weeks, most recently the BPN weekly newsletter. I think you’ll enjoy it.
Winter Preparations (Retail and Wholesale)
In the current low-price environment, it would be a good idea to protect your margin and cover any remaining pre-buy exposure you may have.
Ray Energy can help by converting index-priced gallons to a fixed price. And if you think you need some additional “winter-only” volume, please let us know. We have several options available and we can help there, too.
Customers should also try to lift all of their summer scheduled volume by the end of this month, since winter/summer scheduling ratios are based on summer liftings.
Like you, we work hard to do things the right way. We’ve put in the hard work and applied decades of experience to assemble a diversified supply portfolio of Northeastern terminal assets from New York to Maine, company-owned transports and drivers, common carrier fleets, as well as both U.S. and Canadian supply, to assure you of a reliable supply of propane for this coming winter.
Final Aria for September
As some of you know, I spent about eight years in Minnesota, learning the wholesale propane business at Gas Supply Inc. back in 1989 – from parts and construction to sales and supply. (In fact, my oldest daughter, Lauren, was born in Exeter, NH, in 1989, while I was helping to manifold a 60K storage tank to a 30K storage tank at Bemer’s Petroleum in Glastonbury, CT).
Folks in Minnesota have some unique expressions. My wife still says “Uff Dah!” at times. So, if you’re wondering if we’re prepared to meet your upcoming winter requirements, ”You Betcha” is the answer.
NOTE: The views and opinions expressed herein are solely those of the author, unless attributed to a third-party source, and do not necessarily reflect the views of Ray Energy Corp, its affiliates, or its employees. The information set forth herein has been obtained or derived from sources believed by the author to be reliable. However, the author does not make any representation or warranty, express or implied, as to the information’s accuracy or completeness, nor does the author recommend that the attached information serve as the basis of any buying decision and it has been provided to you solely for informational purposes.
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