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The 2024-2025 winter season exposed critical vulnerabilities in propane supply management. Despite adequate national inventory, regional shortages emerged when cold temperatures drove consumption higher while transportation constraints prevented suppliers from meeting demand. According to LP Gas Magazine, propane prices surged dramatically during January 2025, with Mont Belvieu propane rising over 26% in less than a month.
For businesses with significant propane consumption, even modest price spikes translate to substantial budget impacts. Summer purchasing strategies consistently deliver cost advantages of 10-20% compared to winter spot buying, making timing a critical risk management factor.
The businesses that escaped this crisis treated propane supply as a manageable risk rather than an uncontrollable cost. This guide provides a framework for identifying propane supply risks, quantifying potential impact, and implementing mitigation strategies that protect operations and budgets.
Start Protecting Your Business
Agricultural operations face concentrated seasonal risk during harvest when both demand and prices peak. According to the Propane Education & Research Council (PERC), U.S. agriculture operations consumed approximately 825 million gallons of propane in 2023. A PERC study found that approximately 75% of Midwest farmers with grain dryers use propane to power them, reflecting propane’s efficiency and reliability during the critical post-harvest window. Manufacturing facilities with propane-powered forklift fleets face operational disruption—distribution centers running 20-30 forklifts cannot simply shut down during supply constraints. Healthcare and educational institutions carry the highest consequence risk, where propane backup generators and heating systems are critical infrastructure. Each sector requires tailored risk management approaches.
Before implementing mitigation strategies, calculate the financial impact of various scenarios. Start with 3-5 years of consumption data, identifying monthly patterns and seasonal peaks. Calculate average per-gallon costs during summer versus winter periods to understand your typical seasonal price exposure.
Model a severe winter scenario with significant price increases above baseline. For facilities with substantial propane consumption, severe winter pricing creates meaningful budget variances that can impact operations. Add supply disruption scenarios where delayed deliveries force emergency purchases at premium pricing or operational shutdowns with revenue losses.
Your risk tolerance determines the appropriate mitigation investment. Organizations with low risk tolerance and high consequence exposure should invest more in hedging strategies, even if they carry premium costs. Organizations with higher risk tolerance can accept more market exposure.
Summer months consistently deliver lower pricing as demand decreases. Businesses purchasing during summer can capture meaningful savings compared to winter spot purchases. Pre-buy programs lock in fixed prices for specified gallons during this favorable window, providing complete budget certainty.
Recommended approach: Lock in a substantial portion of anticipated annual consumption at fixed prices during the summer months when pricing is favorable. This secures budget protection for the majority of your needs while leaving a meaningful portion variable to capture favorable market movements.
Fixed-price contracts eliminate price volatility risk entirely, providing maximum budget certainty. Use them for your critical consumption baseline—the gallons you absolutely need regardless of market conditions.
Capped-price programs offer superior risk/reward dynamics. They set maximum prices but allow full participation in price decreases below the cap. Upfront fees typically range from 5-10% of expected costs—a known insurance premium against unknown price spike exposure.
Variable/market pricing preserves maximum flexibility. Reserve this for flexible consumption that’s not operationally critical.
Optimal structure: Contract 40-50% at fixed prices for baseline needs, add 20-30% in capped-price programs for moderate protection with upside participation, and leave 20-30% variable for market flexibility. This creates layered protection while maintaining upside potential.
The 2024-2025 winter revealed that supplier infrastructure represents critical risk mitigation. When product volume shortages occur, suppliers with access to multiple regional terminals maintained delivery continuity by sourcing from alternative locations. In contrast, suppliers dependent on single terminals or limited networks faced delivery delays that disrupted customer operations.
Supply Network Depth
Evaluate suppliers based on their access to multiple terminal locations across your region. Suppliers that can pivot to alternative supply points when one route faces constraints maintain reliable delivery schedules regardless of localized disruptions. Assess whether suppliers own storage capacity or rely entirely on leased terminals—owned storage provides greater control and priority access during supply constraints.
Delivery Reliability Infrastructure
Beyond terminals, examine the supplier’s delivery capabilities during peak demand periods. Suppliers with robust driver networks, well-maintained fleets, and automated tank monitoring systems demonstrate operational resilience. Telemetry-based monitoring triggers deliveries before tanks run critically low, preventing emergency situations that carry premium costs and operational risk.
Financial Stability and Market Position
Supplier financial strength impacts reliability during volatile market conditions. Established suppliers with strong balance sheets and deep industry experience can maintain consistent service levels even when margins tighten or supply challenges emerge. Look for suppliers with track records of operational continuity during past market disruptions, as this demonstrates their ability to honor commitments when conditions become difficult. Financial stability provides suppliers the resources to invest in infrastructure, maintain adequate inventory, and deliver consistent service to all customers.
Enter winter with tanks at 80-90% capacity. This provides a buffer against delivery delays and reduces dependence on emergency deliveries at premium pricing. The cost of carrying higher inventory is typically far less than the risk cost of running tanks low during peak demand.
Identify which propane applications are operationally critical versus flexible. Manufacturing facilities running continuous processes cannot shut down during price spikes. Agricultural operations have narrow crop drying windows where delays risk quality losses exceeding fuel costs. Protect critical applications with fixed-price contracts and priority delivery protocols while accepting more market exposure for flexible applications.
Document clear emergency procedures with your supplier, including 24/7 contact information and escalation paths. Understand your supplier’s emergency response capabilities and priority delivery protocols during severe weather events. Suppliers that offer priority service to established customers during peak demand periods provide valuable protection when industry-wide capacity is constrained.
Develop operational flexibility plans for various disruption scenarios—can you temporarily reduce production schedules, shift operations to alternative facilities, or utilize backup heating systems? Having pre-planned responses enables faster, more effective reactions when disruptions occur.
Q1 (January-March): Continue monitoring consumption and pricing. Maintain regular supplier communication about market conditions and supply availability. Document lessons learned about forecast accuracy, supplier performance, and risk management effectiveness for next cycle. Talk to your supplier about market opportunities for the next season.
Q2 (April-June): Review previous year’s variance analysis. Develop baseline and high-risk forecasts. Lock in 50-60% of anticipated consumption if summer pricing is favorable (at or below 10-year averages).
Q3 (July-September): Assess current supplier’s performance on delivery reliability, infrastructure depth, and service quality during the previous year. Finalize annual supply agreements ensuring contracts include clear emergency delivery protocols and priority service provisions. Fill tanks to 80-90% capacity before heating season begins. Confirm winter delivery schedules and emergency contact procedures. Review budget forecasts and adjust contingency reserves based on current market conditions.
Q4 (October-December): Monitor your consumption and pricing against forecasts weekly. Maintain regular supplier communication about market conditions and supply availability.
Strategic propane supply risk management transforms propane from an uncontrollable cost variable into a managed business input. When market volatility or supply disruptions occur, supplier infrastructure determines who maintains operations and who faces costly delays.
Shipley Energy: 95+ Years of Supply Reliability
Shipley Energy’s infrastructure provides the foundation for effective risk management:
We don’t just deliver propane; we manage the complexity of procurement timing, market volatility, and supply reliability so you can focus on your core operations.
Contact Shipley Energy to discuss how our infrastructure and risk management approach can protect your business from supply disruptions and price volatility.
