Over the last two years, following the pandemic, the propane industry has struggled with its inventory supply. The low inventory will continue to be an issue in 2022, and several propane-reliant segments will face the wrath of low reserves, which directly translates to higher propane prices. While you can always outsource your requirements to reliable propane suppliers, it’s important to understand the transgressions of low domestic propane supply.
In the following sections, we will try to understand what this low supply means for propane inventories, propane prices, and global supply chains that depend on propane.
Low inventories
With countries trying to import quality propane at a lower price, it simply indicates that the domestic propane supply in several global economies is dwindling. According to forecasts, the propane production in 2022 will be even lower than in 2021, at least for the first two quarters.
The drop-in barrel production will likely affect most inventories across the globe. While the number may peak during September, it will likely witness a terrible drop immediately after. Following the fall, propane is expected to adhere to the usual annual trend of the segment.
Price
Until 2021, we had witnessed a sharp increase in the price of propane before it finally dropped in the early months of 2022. According to the latest forecasts, the price of propane will witness another significant rise by up to a whopping $3 per gallon annually in 2022. This will be accompanied by a steady rise in the cost of heating in colder areas. On average, people are likely to spend more when the winter is sharper than in mild winters when people don’t want to spend too much on propane.
Global supply chains
The fall in propane production is also strongly linked to factors associated with the global supply chains. As most of us know, propane has been deemed a byproduct of natural gas and crude oil processing. With the onset of the pandemic, we witnessed several travel restrictions, resulting in a fall in global demand for petroleum and natural gas-specific products. This would naturally result in the decline of propane production.
With the pandemic still ongoing, several propane suppliers also witnessed a strong decrease in workplace morale, with employees falling sick and quarantined. This affected productivity which eventually resulted in a lower overall output. Therefore, supply chains across the globe hit lower propane production, and the industry is still reeling from it.
Changing use-cases of propane
According to the latest economic forecasts, the industry will again witness a sharp increase in the production of propane as consumers across the globe look forward to a sustainable household with the right sources of energy.
The demand is likely to shoot up even more because many consumers now resort to working from home owing to the lockdown-induced flexible working schedules. People spending more time at home are also likely to cook more. Eventually, as the winter months arrive, they will need a steady temperature in their household–a demand only propane can address.
Large economies like China and India are now struggling with air pollution and thus resorting to using clean and reliable alternative fuels like propane. This demand for using clean fuel will subsist for the latter part of the year, increasing the overall global demand for propane.
But why is propane so popular as an alternative fuel? The answer is simple- propane reduces carbon emissions, and when you are using propane, your carbon use is low to minimal. Propane is also deemed safer than gasoline which is why countries across the globe are now switching to vehicles powered by propane.
Bottom Line
With the increasing demand for propane in 2022, you would need to address your propane requirements with competent propane suppliers that deliver just the correct value without compromising on quality. In the coming months, propane prices will likely increase if the supply doesn’t meet the increasing demand. Outsourcing your propane needs to a reliable supplier will be a good decision.
