Propane for heat in New England
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Is propane a good deal for heat in Northern New England?
Transcript of Propane for heat in New England
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Propane as a Hea+ng Fuel Is it a big advantage to Oil?
April 2013
More Informa+on at www.pelletco.com or 207-‐370-‐0350
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Background
• Propane prices are down this last year (2012/13)
• Propane appears aMrac+ve as an alterna+ve to oil in $/gallon
• Propane at ½ the cost of oil per gallon for volume users
• Some are considering switching to propane for hea+ng needs
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Ten Years of Propane Price Indexed
0
0.5
1
1.5
2
2.5
3
3.5
4
Jan 04, 2007
May 04, 2007
Sep 04, 2007
Jan 04, 2008
May 04, 2008
Sep 04, 2008
Jan 04, 2009
May 04, 2009
Sep 04, 2009
Jan 04, 2010
May 04, 2010
Sep 04, 2010
Jan 04, 2011
May 04, 2011
Sep 04, 2011
Jan 04, 2012
May 04, 2012
Sep 04, 2012
Jan 04, 2013
May 04, 2013
Sep 04, 2013
Jan 04, 2014
May 04, 2014
Sep 04, 2014
Jan 04, 2015
May 04, 2015
Sep 04, 2015
Jan 04, 2016
May 04, 2016
Sep 04, 2016
Jan 04, 2017
3 Source: EIA and Pelletco Analysis
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Price of Oil and Propane
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Equivalent Energy Price
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5 Oct 02, 1994
Oct 02, 1996
Oct 02, 1998
Oct 02, 2000
Oct 02, 2002
Oct 02, 2004
Oct 02, 2006
Oct 02, 2008
Oct 02, 2010
Oct 02, 2012
Oct 02, 2014
Oct 02, 2016
Propane has less energy (BTU) than Hea+ng Oil
Propane (Green)
Hea+ng Oil (Blue)
$ per Gallon
5 Source: EIA and Pelletco Analysis
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Propane Sales by Refiners
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Supply
7 Source: EIA
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Produc+on
8
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Demand
9 Source: EIA
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Price closely follows Inventory
2010-‐2011 (red)
2011-‐2012 (Blue)
2012-‐2013 (green)
Retail Price
Days Supply
R² = 0.87974
R² = 0.94478
R² = 0.95909
2.75
2.85
2.95
3.05
3.15
3.25
3.35
3.45
3.55
10 20 30 40 50 60 70
10 Source: EIA and Pelletco Analysis
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Factors to consider
• Prices are down 10% in last year – Will they stay down? – Price vola+lity has increased-‐now greater than hea+ng oil
• Consump+on is up 15% in last year • Produc+on is up 15% in 2 years and expected to expand
another 15% in next 2 years Source: EIA • Inventories are lower in 2013 • 2011-‐2012 factors contributed to 2012/13 pricing
– Warm Weather=lower use ~4% – Farm Use ~4% – More produc+on ~11%
• Deeper discounts for volume users in 2012/13
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EIA forecasts a stable rela+onship
0.7
0.74
0.78
0.82
0.86
0.9
2013 2014 2015 2016 2017 2018 2019 2020
Index of Forecasted Propane to Oil Price on Equivalent Energy basis for Commercial Users
12 Source: EIA and Pelletco Analysis
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Summary Observa+ons • Propane has become aMrac+ve rela+ve to hea+ng oil for large users • Large users have benefited from market disloca+ons
– Not likely to con+nue • Propane Prices are a func+on of inventory and loca+on (not just
produc+on) – Limited propane is stored in the Northeast – Transporta+on is not easy or cheap and winter rates can spike
• Propane as a gas carries addi+onal safety risks • Propane prices are unlikely to drop significantly form present levels
– Price vola+lity has increased in last year and now is 40% greater than oil on an equivalency basis
• Opportunity for $ savings from conver+ng from hea+ng oil to propane will narrow
• Propane is equally expensive per MMbtu, equally risky in the event of oil supply disrup+on, subject to transporta+on issues, more vola+le, and a source of liability risk. – is it ra+onal to change from oil to propane, when wood is available?
13 Source: Pelletco Analysis
