Written on: March 14, 2022
The unprecedented surge in fuel prices, current volatility and future uncertainty create a dangerous cocktail for heating oil and propane companies. What do you need to do now, and in the coming months, to ensure you get through it with the least damage?
Three of the industry’s foremost experts shared their best advice for managing through this crisis.
Marty Kirshner, Partner & Chair of the Energy Practice at Gray, Gray & Gray, focused on successfully managing your cash flow, banking relationships and margins, and avoiding key missteps as this volatility continues.
Kirshner stressed the importance of communication between retail propane marketers and their banks. “Educate them on how your business is affected in the current environment. Make the case for an increased line of credit. There are not many lifelines when you reach the limit,” Kirshner said. He also discussed the possible benefits of refinancing, the importance of staying on top of collections, avoiding discounting right now, keeping parts inventory low and knowing your propane inventory status very well. “The bank can be your best friend or your worst enemy,” he said.
Rich Goldberg, President of Warm Thoughts Communications, will guided participants on strategies for messaging customer communications, dealing with price protection renewals and offerings, handling customer requests for modifying deliveries, budget plan issues, margin enhancement, and generally turning lemons into lemonade.
Goldberg discussed the importance of communicating with customers. “It is important to think like a customer,” Goldberg said. “Many think you are profiting more at their expense. Don’t wait for the phone to call. Reach out to them with the basic details. Don’t overstuff the message. Just let them know ‘We care, We’ve got your back, and trust us.'” He emphasized this is not a time to lower margins too much. “Be a price hawk. Keep the price as solid as it needs to be.”
JD Buss, President of Twin Feathers, addressed the forces that are driving volatility in the propane and heating oil markets, potential scenarios for the short and mid-term, and how to avoid making painful mistakes in supply and hedging for the coming year.
Buss said the propane market was already bullish before the Russian invasion of Ukraine. “COVID was a factor, world demand was strong, and OPEC was not meeting production quotas,” he said. “Volatility only increased with the Ukraine invasion. We’ve seen a 41% increase in a five-day period, we’ve seen a 30% decrease in a short time as well.” Buss discussed how two major strategies, blending and optionality, can play a role in reducing risk and ensuring a decent profit margin year.