The Energy Exchange Podcast Episode 9: Propane Supply Resilience

Host Gary Sutton sat down with Derek Shaw, Operations Manager at Shipley Energy, to discuss how propane supply chains really work and why businesses that rely on propane can’t afford to wait until the next supply disruption to think about it.

Listen on Spotify

Key highlights from the conversation include:

• Why propane shortages aren’t about a lack of supply, but about breakdowns at every link in the chain, from wellheads and pipelines to rail lines and loading terminals, and how this past winter tested all of them at once.
• How a terminal outage in November sent propane prices jumping $0.30–$0.40 in a single business day, with temperatures already in the single digits and demand surging.
• Why the smart time to buy propane is March and April and how pre-buying and forward contracting protects businesses from being a “price taker” at the worst possible moment.
• The operational depth that separates Shipley from smaller suppliers: cross-trained drivers, multiple fleet types, diversified supply sources, and why that flexibility kept customers warm when others stopped answering the phone.
• Practical steps any propane-dependent business can take right now, including pre-buying, investing in onsite storage, and using tank monitoring through EcoGreen to stay ahead of unexpected consumption spikes.

Take a deeper dive into how propane supply chains break down under pressure, why timing your purchase matters more than you think, and how businesses can build supply resilience before winter demand peaks. Enjoy more episodes of the Energy Exchange podcast.

Wholesale Fuels ->

Transcript from Episode 9

Gary Sutton: It’s time for another Energy Exchange here with Shipley Energy. I’m Gary Sutton and this morning I’m with Derek Shaw, Operations Manager talking about propane. Good morning Derek. How are you doing?

Derek Shaw: Well how are you doing.

Gary: Well I’m doing very well. We’re talking about why supply matters more than you think. And when we talk about propane, you know, this winter, we heard an awful lot about propane shortages in parts of the northeast and Mid-Atlantic. When people hear about propane shortages, it’s often not because propane doesn’t exist, but that it can’t get to where it needs to go. Tell us about how that happens?

Derek: Yeah. Well, the supply chain for propane can break down in all sorts of ways. And this past winter, it basically did it every step. Let’s paint the picture. So most of the propane that comes into PA is coming from either Ohio, the Marcellus Shale, or it’s coming down from Canada, and it travels either by pipelines which kind of frame the state and there isn’t some major propane pipeline that comes right through central PA. So central PA is fed by railroads. And then both of those two transportation methods, they feed terminals, which are large regional gas stations. That’s where the tractor trailers pick up. And basically, at every step this winter, we saw issues at one time or another with each of those.

So I know in February we had at about two weeks where the well heads were having issues because it was just so cold, it was breaking down. There was snow on the ground. They were only producing 75-80% of what the state needed. When it was that cold for months at a time, we had a pipeline terminal, which you would normally think of as the most reliable source of supply, Marcus Hook Major terminal in the southeast of Pennsylvania, right next to Philadelphia, had an explosion before it even got cold in November. Equipment went down all throughout December as the weather turned. They could only put out about 70% of their normal supply. And then the terminals, as we got into January and February, were having issues. Equipment freezes, valves shut.

We had one terminal I know, in Schaefferstown, PA, where you can normally load four trucks at a time, went down to just one truck at a time instead of 30 minutes in and out. You had drivers sitting for 4 to 5 hours at a time. That’s before we even touch on rail. Rail can have all sorts of issues.

You remember like 3-4 years back, we had the major national news about a rail strike, union stepping out. Well, that absolutely slowed down propane of what would have otherwise been a mild winter. What would normally take ten days for product to get from Ohio to here was taking 15-16 in the middle of the coldest month of the year. So all of those can add up and they tend to add up.

Gary: So pipeline failures, real disruptions, terminal issues, and it doesn’t all just necessarily have to be with the weather. I mean, it can be with other things, as you mentioned right there. But many businesses treat propane as a commodity purchase and focus mainly on price and buying in the moment when they need it. So why should they think more broadly in terms of keeping their operation running smoothly?

Derek: Well, it’s because of their intense what a customer is looking for propane. It tends to be when everyone else is also. So the rule of thumb in the industry is that for every one gallon of propane that you sell in the summer, you’re selling three gallons in the winter.

So if you’re one of those three gallons, if you’re looking for that in the winter, that’s when everybody else is looking. So if you were trying to get propane filled in December, January or February this year and you didn’t pre buy, you didn’t contract, then you were calling after the railroads went down after a pipeline terminal had a disruption.

After a force majeure was called. If prices spiked above, that Marcus Hook issue that I just mentioned a minute ago, I remember in real time a business day after that happened, prices in the state jumped $0.30-$0.40 and it went from 0 to 60. That was the same week. The temperature’s at 20 degrees. So it comes on really fast.

So being as proactive as you can be, purchasing it during the normal supply season for propane, which is actually March and April of each year, basically all the suppliers and producers want to have everything planned out for the next 12 months around the spring. It really helps you get ahead of those potential problems.

Gary: That word proactive is really big here. And during extreme weather events or supply distribution problems, what advantages do customers have when they’re working with the reliable, established supplier with strong supplier relationships like the Shipley Energy?

Derek: Well, the biggest thing is that as those issues pop up, you want to work with a supplier that can work around them.

So, you know, I’m a I’m a part of the team that purchases the supply for propane for Shipley. And a big goal for us is stability. We plan for average winter, and we spread our risk across all those different transportation methods. So every year, you know, we are absolutely buying product on the railroad. But we make sure that the supply we’re getting isn’t all in one basket.

We’re getting some from Canada. We’re getting some from the shale. You know, we take some of those contracts at the point of delivery here in Pennsylvania, and we buy some of those rail cards back at the source and ship them in ourselves. We also make sure that we’re purchasing, from terminals that are supplied by pipeline. And, there’s 1 or 2 spaces in it just outside of central PA in the northeast, where there’s physical storage caverns.

And we make sure that we have some of that, because there’s definitely been periods in the past couple of years where the railroads slowed down. And then for a week or two, we have to drive every truck up to Schaefferstown, PA or farther to fulfill orders in Chambersburg, because it’s the only stuff that’s available. And that’s a physical limitation. It’s not about market dynamics or anything else. So we spread that out.

We’re talking with Derek Shaw, operations manager here this morning at Shipley Energy. Derek, what separates a reliable propane supplier from one that might struggle during high demand events? Do you have some anecdotal stories about those kinds of things?

Sure. So in addition to sort of the supply diversity, the other piece that matters is transportation. It’s so far we’ve been talking about, you know, the transportation to a local region, but then your own, it has to go on a truck from a terminal to your house. If you are working with a smaller company that only has a few drivers or a few places where they can pull product, if a driver gets sick, if a truck breaks down, they can’t wiggle.

Shipley has fleets for diesel, gasoline, transportation, sales. We have all of our home delivery fleets and we cross-train our drivers, so that if we need somebody to come in and pinch hit and drive propane for a week, they’re ready. They can do that. That takes a lot of preparation. That takes cross training. They have to get authorized to terminals.

And we do that. We certainly do that all of this season. You know, there were definitely examples that we heard from our customers, some that came to us in a pinch in January or February, where there were suppliers locally and even nationally who operate locally, who were 3 to 4 weeks out on deliveries, you know, couldn’t get there timely.

We also had a I know of one, I won’t name a name, but I know if at least one local company that just stopped taking calls. Yes, February, which was kind of shocking to hear.

Gary: We often hear that propane demand, as you described aptly here, could spike quickly during extreme cold or natural gas curtailments. So how do these sudden demand surges impact supply availability and transportation capacity?

Derek: So that absolutely happens. It ramps up really, really quickly. Come out of nowhere.

Again having a supplier with a deep bench of supply relationships and the ability to, you know, juggle their transportation needs can meet that. You know we had one example of a customer that doesn’t contract with us for propane, but will buy on spot basis. It’s because they don’t use a lot of propane in the average year.

They mostly use natural gas. And this past year we had curtailments of natural gas in Pennsylvania and Maryland, where they just can’t get any more natural gas. It doesn’t mean that their heat needs don’t go away. And so they have to switch to an alternate fuel. In this case, this customer needed 3 or 4 loads of propane really, really fast.

It was February. Everything’s already strained. And so, you know, we were able to make that happen. We used two methods. We used an outside hauler to pull from a much farther source than we would normally be pulling for that customer based on their geography, but they needed it. And we also had a cross-trained driver come over who normally delivers diesel gas. We had him drive propane and he was able to do it to keep the customer warm and save the day.

Gary: So for businesses, that rely on propane heavily, what are some practical steps that they can maybe take to reduce their supply risk and avoid those kinds of last minute emergency sourcing situations that happen during peak season or during shortages?

Derek: The best thing you can probably do is to prebuy. If you’re just buying completely on the spot market, then you’re just a price taker at whatever the price is that day. But the wholesale market sets up basically the upcoming winter and the upcoming summer in March and April every year. I would suggest reaching out to whoever your supplier is in those spot moments now.

Talk to them about how to purchase for the upcoming year. You don’t need to have a ton of volume to do that. I think some purchasers or customers are scared off of doing that because they only take 3 or 4 loads a year. We can still absolutely do that. Shipley has a base of supply for our retail customers, and then we have wholesale customers that benefit from that economy of scale, because we’re purchasing for a much larger group than just any individual customer.

They probably couldn’t go to a producer and try to buy a railcar themselves. That’s ridiculous to try and do that. But you would be able to benefit from that security by coming to us. That would be you know, the number one thing is prebuying. But then in addition to that, investing in some onsite storage. Investing in tank monitoring, which we can also supply through one of our partners, EcoGreen, so that we can all keep an eye on your propane tank. It won’t sneak up on you if you’re burning more than you expect in the middle of February. We’ll know ahead of time. Being as proactive as possible really helps in both purchasing and monitoring.

Gary: And a final thought here, Derek, you kind of touched on it a little bit. When customers partner with Shipley, what tools or strategies do you offer to help people manage supply risk and stay ahead of that, you know, market disruption?

Derek: Well, kind of all of the above. I mean, we have a deep relationship with suppliers both within the state and then outside of the state, which we call upon, you know, when things get tight, when propane is tight, we were pulling product from outside out of Ohio, out of West Virginia, even out of, the major hub on the Mid-Atlantic is down in the Carolinas at of APEX. And we had trucks come up from there this past winter. We offer all sorts of different ways to purchase, manage your budget and also manage your risk. You can do that pre buying with fixed prices variable prices. And all of this is also to say, all the market intel, all of the supply information, all of that’s being managed by our wholesale team.

We don’t have people wearing multiple hats to try and care for everything for all of your potential needs. You know, all of that work is being done by the wholesale team. Our operations team, they’re focused wholly on deliveries, on their customers and on their drivers. So we have internal partnership and diversification, where if you come to us and you work with us, you’ll benefit from that collective expertise.

Gary: Derek Shaw, Operations Manager with us to support you here on our Energy Exchange. And as you heard, reliability, productivity and big moments of problems and also being proactive and staying out in front of all these things will help you. But most importantly, Shipley stands ready to help you all the time when it comes to your propane needs.

I’m Gary Sutton this morning on this Energy Exchange for Shipley Energy.

Talk to a Supply Expert

Don’t wait until an emergency strikes to strengthen your propane supply chain. Contact Shipley Energy today to get ahead of the next disruption and protect your operation when it matters most.

Wholesale Fuels ->