Propane prices: Going up or down?
Higher propane prices this week
Propane prices made another advance of 2.5 cents this week, which was on top of a 5 cent advance it made last week. Frankly, that’s a pretty darn big move for propane and it caught our attention. Which is why we thought we’d talk a little about the long-term for propane prices.
What’s the deal?
So why the big move in prices the last couple weeks? A combination of surprisingly low stockpiles of crude in the US combined with reports that OPEC plans to maintain production cuts on oil, seems to have convinced some traders that the era of cheap-o oil might be over. It was enough to push crude close to the psychologically important $50 level…and propane has moved along with it.
Not your Daddy’s OPEC
The question is…are these kinds of prices here to stay? Many experts think not. OPEC looks a lot like a paper tiger these days, holding lots of meetings about production cuts but lacking real control over their members. Most OPEC member states have huge bills to pay for social programs they’ve implemented to prevent their populations from getting upset about having their natural resources spent on metallic gold Ferraris and pleasure yachts as big as USS Theodore Roosevelt. Those programs mean they need to keep pumping oil even if the price isn’t what they want it to be.
In addition, American shale producers who OPEC tried to crush a couple years ago with production INCREASES, have found a way to produce oil profitably at super-low prices. Whoops! Those pesky Americans. Bad news for OPEC as America now threatens to become the biggest crude and natural gas producing country in the world. USA! USA! USA!
Gasoline Cheaper than Poland Spring Water?
That has all meant good news for all of us who use gasoline, heating oil, and propane for the last few years, but recently some Wall Street types seem to be betting that the party for us is almost over and crude prices are headed higher.
We’re not experts here at Tankfarm but count us among the skeptics of long term higher crude prices. In addition to our views on OPEC and the miracle of American shale production, part of our rationale is that every country in the world right now is trying to get OFF of oil. Elon Musk just released his Tesla Model 3, which can get 310 miles on a single charge. The UK just passed a law stating they’re going to ban gasoline and diesel engines by 2040. Solar gets cheaper and cheaper every day.
We think those OPEC guys might want to think about getting a smaller boat.
Bottom line- we see plentiful energy, and relatively low propane prices for a long time to come.
