Why We're Worried About New Record Breaking Propane Exports.
A new record is set for US propane exports. Is it sustainable?
In November of last year, just before the height of the winter crisis, 410,000 barrels of propane left the country everyday. It turns out that was just a sign of things to come because now it's being reported that in April the US surpassed that benchmark with over 506,000 barrels of propane being exported per day. (Bloomberg) That's why this leads us to doubt whether this new rate is really sustainable.
The fear is that rather than problems being addressed here at home such as improving storage capacity for rural areas in need, everything has gone towards getting ready for the massive expansion of LPG exports that will open up through the widened Panama Canal. One such case is the Port of Houston, where most US propane leaves the country, as it is undergoing a massive upgrade to be ready for large ships that will be using the canal. Another clear sign of big changes in the industry is that there's been a surge in ship orders for huge gas carrier vessels specifically built to fit the canal's dimensions.
The fact is that the Panama Canal project is opening up US propane exports to thriving markets specifically in Asia and we're doubtful we can maintain this rate.
The big problem exporting so much LPG is that Asia's demand will always be multiple times greater than our supply. That means that there just won't be an incentive for propane producers to keep propane in the country and prices down.
In Asia an entire region of the world is looking to enter into the modern era of energy and they're especially looking for cleaner fuels. For example, China has a notorious smog problem that is directly related to their outdated energy means of over 2,300 coal plants. With coal being used for everything from heating to cooking, studies have linked all that air pollution to millions of cases of respiratory illnesses as well as it has shortened the populations average lifespan by 5 years. It's no wonder why the public outcry for a solution has really spurred on the growing demand for more propane.
This a similar story in many other Asian countries. Demand for cleaner and cheaper energy simply makes propane very popular in the region and the lack of competition is what has kept the price down which is why this could be the end of inexpensive propane for us. Now competition is coming.
So while we hope everyone is enjoying their summer, we still feel it's important to always look out for our customer's best interests. Changes in the propane costs are incoming as soon as the Panama Canal expansion opens up and that date is sooner than we think.
We'll continue to keep you informed on this story so stay tuned.
