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By now, everyone is aware of what is taking place at the Strait of Hormuz and the upward price pressure the war is putting on both Brent crude and WTI. There will also be secondary effects on top of this obvious war risk crude premium that could impact the prices you pay for propane moving forward.
That will come from increased diesel fuel costs, assuming this war continues for weeks and weeks. While the United States Gulf Coast has the most robust refining array anywhere in the world, the rest of the world doesn't have that luxury, with Middle Eastern supplies essentially being cut off.
Countries around the world will begin to look to United States producers for their diesel and unleaded fuel. In essence, that means domestic demand will compete with international demand, and in such a situation, we will likely see diesel prices rise higher than one might expect from an increase in the cost of crude oil alone. The same will be true of jet fuel.
Diesel fuel is the lifeblood of the global economy, and that is certainly true of the American economy. Almost every consumable good in the United States is exposed to the price of diesel fuel. Be it agricultural crops making their way from the fields to the marketplace and into the grocery stores, any and everything you see on the shelves of Home Depot and other similar stores, clothing that is transported to department stores, and so on.
This is obviously true of how propane gets from a terminal into your storage facility. It's also true of many of the trucks and botails you operate in your business. While we will likely see Conway and TET values rise as crude oil moves higher, it won't be long until we see an increase in fuel surcharge values on the trucking side.
WTI closed at $74.66/bbl yesterday, and as of 10:39 AM central time today, it was trading near $79.50/bbl. It closed at $65.2/bbl just one week ago. The price of poker is going up, and propane will be dragged along with it, despite its bearish fundamentals.
