|Title:||United States supply and demand of domestic retail propane market by geographic region in gallons for 2008|
Start of full article - but without data
XX Billion Gallon Domestic Retail Propane Market
West Coast XXX million shortfall
Hawaii XX million shortfall
Rocky Mountains XX million surplus
West Central XXX million surplus
Gulf States X.X million surplus
Lower Atlantic X.X million shortfall
East Central XXX million shortfall
North Central XXX million shortfall
New England XXX million shortfall
Central XXX million Atlantic shortfall
Annual Regional Shortfall & Surplus Gallons
Based on 2008 market as reported in 2010 Purvin & Gerlz
Propane Infrastructure Study for PERC
In addition to data-providing questions we ask each year in the State of the Industry survey, we invite responding retailers to comment on what's on their minds. This year we asked them specifically to comment on their greatest concern for the coming year regarding continued success of their delivered retail propane sales.
We weren't surprised to find propane pricing mentioned about twice as often as any other concern, considering that consumer angst over energy costs has been escalating the last few years. Other retailing-specific concerns about product supply and the loss of customers to competing energy sources were also high among retailer concerns. But it was interesting to find that Washington's handling of the economy and unemployment, as well as the plethora of government regulations, were likewise seen as "hitting close to home."
The wolf at your front door
As more than XX.X% of dealers responding to our annual State of the Industry surveys have more than XX years in the retail propane delivery business, we estimated most to generally be in the XX to XX age range, then compared our estimate to a recent Pew Research Center study into age-specific opinions about government. Their research found XX% of this age group want a smaller government, and XX% said that government controls too much of daily life. Altogether, that research supports the responses and comments of dealers in the 2011 SOI survey. There is little, if any, trust of Washington.
The nature of propane retailing gives the local Gas Man a uniquely close-up view of the personal consequences for consumers - their long-time customers and neighbors - from our country's dismal economic condition and the failure of Washington's "stimulus" efforts ... where some households must consider choosing between fuel and food.
One retailer responding to our survey said, "People do not have the income to match their bills." Looking at how to not let his operation deteriorate, another retailer worried about his "ability to afford new equipment and trucks."
Price being the top-most concern of retailers, some blame "speculators" for manipulating propane price ..., Others say propane exports drive up the domestic price. Then there are retailers who tried putting a bit of humor into their worries: "Walmart electric blankets may be my biggest competitor" ... and just "need wet corn and cold weather."
Looking at the bigger picture, some retailers are up front with their feelings about Washington's responsibility for our nation's economic mess: "Lack of political willpower!" and "Useless Congress!" and "Get rid of the president! Term limits for Congress!"
You may be inclined to think that complaints about Washington during a particularly pitiful economy indicate a bias due to political party leaning. When you consider, however, the number of retailers responding to our survey who felt that the lack of presidential leadership and congressional performance - XX.X% and XX.X% of retailers, respectively - would be detrimental to their business in the coming year, it's apparent that their responses are set against the background of their businesses, their customer communities and their years of experience - not merely political party leaning.
In fact, we asked retailers on the survey how their business had been changing in the past year. Seeing the percentages of responders reporting various aspects of their businesses having worsened from the previous year, they have reason to doubt a deadlocked Washington will provide timely solutions for the economy - to trickle down to their business anytime soon.
In this year's SOI survey questionnaire, we asked retailers XX questions - most having multiple answer possibilities. Altogether, the responses we received provided nearly XX,XXX data points. During our planning of the questionnaire, we realized that this year it had to address more than how each retailer felt about their business within the context of their territory. We had to ask about even more than the condition of the propane retailing industry. We had to ask how pervasive the condition of our country and Washington were to their business. And so they told us.
The topical arrangement of this report - the economy, regulatory environment, current propane retailing market, supply availability, the rural nature of propane sales, the agriculture market and retailer future expectations - provides glimpses into the bumps and potholes along the road from the front door of your retailing operation to the front steps of Washington. You'll find an abundance of notable quotes, and data from EIA and USDA to substantiate what retailers tell us.
We could not say it any better than Ronald Reagan did: "Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it."
Retailers across the country told us this year that they are worrying about the direct impact of government regulation and legislation on their business ... worrying that regulation will become increasingly hurtful ... further lessening their trust in Washington. About XX% said regulation has been more pervasive in 2011. The majority believe, moreover, that regulation will further hurt their business in 2012,
You may be interested in knowing that there is potential regulation - though indirect for propane retailing - that could potentially hinder new home construction and, therefore, new propane sales opportunity. It regards the Endangered Species Act, where the Fish & Wildlife Service will be reviewing additional species of animals and plants that could double the X,XXX already protected as "endangered" or "threatened." Particularly for the Mid-Atlantic, Southeastern and Gulf Coast regions, it could mean additional building restrictions and permitting. If that doesn't already make you hot under the collar, learning that the Endangered Species Act overrides any consideration of economic costs, lost jobs or reasonable use of land by landowners should do it. Obviously, we can't assume regulation is based on common sense - although it seemingly should be.
Imagining that such regulation could particularly impact new home construction on outlying parcels of land - a prime market segment for residential propane - the latest home building projections provide a further "downer," as the 2012 forecast fell in just the last six months from a XX% increase in housing starts to only XX%.
No doubt, many of the propane dealers who "raised a red flag" on this year's survey regarding regulation had in mind - for one - the individual healthcare mandate that could severely affect small retailing operations. The Supreme Court will examine the constitutionality of this act next spring.
And, if you think regulation is escalating beyond what may affect your business, you aren't just imagining it. The administration has been adding XX,XXX regulatory agency jobs per year, has imposed XX new major regulations at a cost of $XXX billion over the next XX years, and has another XXX "in the pipeline," a House Oversight Committee report states.
Propane retailers defending their turf
Competing on price
A series of articles in LP Gas Magazine earlier this year discussed propane sales as reported by the American Petroleum Institute, as well as results of an ICF International market outlook report for PERC - both providing evidence of significant changes in the propane industry, including declining annual domestic propane sales in the last decade of more than X.X billion gallons. The rising price of propane, decreasing electricity costs, natural gas pipeline expansion, consumer conservation, high-efficiency appliances and agricultural machinery, Washington's alternative energy incentives, as well as fewer homes being built in the recessionary economy, have all, no doubt, contributed to declining propane sales.
As significant as the issue of competing with other energy sources is for retailers in regard to maintaining or growing their customer base, this year's LP Gas State of the Industry survey asked retailers how they rated the competitive strength of each. Survey data was charted by region to make it most meaningful, considering the differing availability and price of natural gas, or the price of electricity across the country. Obviously, in some regions retailers feel a considerable competitive incursion.
To read comments retailers wrote on the SOI survey questionnaire about other energy, refer to the box on the right.
Ultimately, underlying the retailer ratings of the competitive strength of other energy sources against propane - whether from newly-expanded gas pipelines or more-affordable electricity - is pricing. When asked on the survey, "What is your greatest concern for the coming year regarding continued success in your delivered retail propane sales?" they resoundingly said price.
Competing on incentives
A few SOI survey respondents mentioned geothermal energy with its tax credits getting attention within their territories. One retailer said: "Geothermal conversions [are being] spurred by programs that bash ... propane ... as high-priced and unsafe." You will be interested in another recent Pew Research study on alternative energy that found the American public is changing in its feelings about Washington's funding development of new energy technology. From 2006 to 2009, about XX% supported increased government funding for alternative energy research. Public favor of such funding has now fallen to XX%. Alternatively, XX% are in favor of allowing more oil & gas drilling in U.S. waters. It appears that a divide between the public and the focus of the administration's energy policy may be growing.
Competing on tactics
In addition to competitive energy sources, we likewise asked retailers to rate the strength of competition they felt from other propane retailers operating within their marketing area. When charted by region, again there were considerable differences. What's more, XX.X% of responding retailers said new retailer competition had opened for business in their territory in the last XX months - an average of one new competitor in each of their territories. On the other hand, XX.X% reported having expanded their own geographic territory to increase their retail propane sales potential.
From the overall propane industry standpoint, a propane consumer's change from one retailer to another does not reflect as a loss or gain in propane gallons sold. In some regions, however, by comparing the competing retailer chart to the competing energy sources chart, it's obvious that the competitive ploys of other retailers were rated at a higher threat level than other energy sources.
Finding a workable, sensible strategy to retain competitive advantage, whether dealing with other energy or other retailers, is always a challenge - particularly in an economy when you can't afford to lose any customer. Over years of gathering retailer input from SOI surveys, however, we have found that there are wide-ranging retailer opinions about what are sensible marketing tactics. It's often a matter of a tactic working for one retailer as "a great sales tool," while in the eyes of a competing retailer it's "below-the-belt," aggravating or even occasionally illegal.
This year, XX.X% of retailers responding to our survey said they either sold tanks or provided them free to customers. Other retailers say it's a sure way to allow customers to easily jump to another retailer offering a "sweet deal" like below-cost pricing for new customers.
Another point of disagreement is will-call delivery versus the cost-effectiveness of keep-full route-scheduled delivery. On average, surveyed retailers do both equally. It wouldn't be surprising if more customers were requesting will-call, trying to tightly manage timing of their household expenses.