The domestic U.S. propane market annually accounts for roughly 9 billion gallons of demand. The pathway from the wellhead to an end user is complex, involving pipelines, railcars, trucks and tankers, and wholesalers are essential in moving all that propane from fractionators and refineries to propane terminals. A wide variety of players fulfill this role, from large publicly traded companies to smaller private ones, but as we detail in today’s RBN blog, they all do one thing — move propane one step closer to its retail destination.
This is the second blog in our series about propane markets. In Part 1, we outlined the journey of propane from wellhead to burner tip and discussed the various segments of the domestic propane market, including industrial, petrochemical, commercial, residential and agricultural demand. We also introduced the role of wholesalers and retailers. In today’s blog, we will review wholesalers’ role and purpose in the market in more detail.
What Do Wholesalers Do?
Wholesalers — companies that sell propane to retailers — have four primary functions. The first is supply aggregation, which includes acquiring propane from multiple sources. These are usually midstream companies that operate fractionation facilities and refiners that produce propane as a byproduct.
The second function is operating logistics networks (middle section of Figure 1 below) to ensure the timely delivery of propane across regions. Many wholesalers maintain large fleets of propane transport trucks to handle short-haul deliveries to retailers. They also operate (and sometimes own) truck fleets or railcars to handle long-distance transport to terminals. Wholesalers also secure capacity on key propane pipeline systems that connect production areas to major markets. Additionally, they operate propane terminals that are strategically located near demand centers, where propane can be stored and distributed to meet seasonal and peak usage.
Figure 1. Wholesale-to-Retail Propane Value Chain. Source: RBN
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