The Dorian Gray Pill

Mostly, I try to post only market info on this site.  But I can't resist.  This op-ed is by a conservative economist that teaches at Harvard. 

I am confident that you will find it thought provoking.  Below is an excerpt,  the whole article is HERE.

Imagine that someone invented a pill even better than the one I take. Let’s call it the Dorian Gray pill, after the Oscar Wilde character. Every day that you take the Dorian Gray, you will not die, get sick, or even age. Absolutely guaranteed. The catch? A year’s supply costs $150,000.

Anyone who is able to afford this new treatment can live forever. Certainly, Bill Gates can afford it. Most likely, thousands of upper-income Americans would gladly shell out $150,000 a year for immortality.

Most Americans, however, would not be so lucky. Because the price of these new pills well exceeds average income, it would be impossible to provide them for everyone, even if all the economy’s resources were devoted to producing Dorian Gray tablets.

So here is the hard question: How should we, as a society, decide who gets the benefits of this medical breakthrough? Are we going to be health care egalitarians and try to prohibit Bill Gates from using his wealth to outlive Joe Sixpack? Or are we going to learn to live (and die) with vast differences in health outcomes? Is there a middle way?

Will the Demand for Assets Fall When the Baby Boomers Retire?

A new paper from the Congressional Budget Office states the following:

"...[will] the demand for assets, such as stocks and bonds, will fall after the retirement of the baby-boomer generation—the segment of the nation’s population born between 1946 and 1964, whose oldest members turned 62 in 2008. Some economists have warned of the possibility of a dramatic decline in demand as baby boomers sell off their assets to finance their retirement; they assert that the sell-off could cause a dramatic decline in prices. An evaluation of the evidence, however, indicates that such a dramatic decline in asset demand and prices is unlikely."

Malcolm Gladwell on Underdogs and Inliers

Malcom Gladwell is an author I enjoy greatly. And I recently found two pieces of his that are worth your time. One is about achieving success as an underdog. The next is about successful people who get missed by the media - "inliers" in his vernacular.

From the New Yorker:

Insurgents, though, operate in real time. Lawrence [of Arabia] hit the Turks, in that stretch in the spring of 1917, nearly every day, because he knew that the more he accelerated the pace of combat the more the war became a battle of endurance—and endurance battles favor the insurgent. “And it happened as the Philistine arose and was drawing near David that David hastened and ran out from the lines toward the Philistine,” the Bible says. “And he reached his hand into the pouch and took from there a stone and slung it and struck the Philistine in his forehead.” The second sentence—the slingshot part—is what made David famous. But the first sentence matters just as much. David broke the rhythm of the encounter. He speeded it up. “The sudden astonishment when David sprints forward must have frozen Goliath, making him a better target,” the poet and critic Robert Pinsky writes in “The Life of David.” Pinsky calls David a “point guard ready to flick the basketball here or there.” David pressed. That’s what Davids do when they want to beat Goliaths.

From Sports Illustrated:

Nick Faldo [is a golf inlier]. Think about it. He wins six majors. He's the dominant golfer of the late 1980s and early 1990s. But we don't mention him in the same breath as, say, Arnold Palmer, even though Palmer only won one more major than Faldo. And why? Because Palmer had Nicklaus and Faldo had, well, Scott Hoch, Mark McNulty and John Cook. Now imagine he comes along in the late '90s and goes toe-to-toe with Tiger Woods from the beginning. All of a sudden Faldo gets immeasurably magnified by the comparison. I'm not saying he'd beat Tiger. (Are you kidding?) But he's the perfect foil. I got a tape recently of the 1996 Masters, when Greg Norman had his epic collapse on the back nine. That tournament is always explained in terms of how Norman choked, as if there were something inside him that inevitably caused him to surrender a six-stroke lead. Nonsense. Surely the key to that whole collapse is that he's paired with Faldo, and Faldo in his prime was terrifying. He was surly and tough and charismatic and emotionally and psychologically bulletproof, and I feel like he'd do a better job of getting under Tiger's skin than anyone out there right now. What's the defining fact about Faldo? His ex-girlfriend once destroyed his Porsche with a 9-iron. The corresponding fact for Woods is that his favorite band is Hootie and the Blowfish. Hootie and the Blowfish? What's Faldo's favorite band? Joy Division? Or some kind of obscure Welsh thrash band too hard core for American radio?

60 Minutes on Clean Coal Technology

A Fantasticly Entertaining Waste of Time

The Washington Post held its third annual Peep-Art Competition recently.

HERE are the 20 top reader diorama submissions.

Climate Change Doubters Unite

Behind a new website.  

www.climatedepot.com

New Clear Energy

Is Nuclear Energy the Answer to our power-centric lifestyle?

Here is an opinion article from the Wall Street Journal that details the pro and con. 

Monte Carlo Simulations In Baseball

I remember playing strat-o-matic baseball with my older brothers as a kid. This is just as cool.

In Defense of Derivatives

From the opinion page of the Wall Street Journal, by Rene Stultz:

From the perspective of Main Street companies, derivatives are not just about high finance, quants and politics, but about investing in America's core industries, jobs and economic recovery. Companies find that over-the-counter derivatives are essential to their day-to-day operations. Derivatives help insulate them from risk, which allows them to borrow capital at better prices than they would otherwise. And derivatives are more useful than ever in these days of unusual volatility in financial markets.

For example, not being able to hedge currency risk through the use of a derivative can leave a company exposed to fluctuations in currency markets. Without derivatives companies could see movements in exchange rates turn a profitable export contract into a money-losing agreement.

In its current annual report, Caterpillar Inc. makes the case for why it relies on derivatives: "Our risk management policy . . . allows for the use of derivative financial instruments to prudently manage foreign currency exchange rate, interest rate, commodity price and Caterpillar stock price exposures...."

Our businesses need derivatives. Most of us choose to drive cars even though they sometimes crash. But we also insist that cars are made as safe as it makes economic sense for them to be, and that speed limits and other rules of the road are enforced. The same logic should apply to derivatives.

Infographic on Global Warming

From the Onion.

Wachovia MLP Primer

100 pages of information - a very thorough review - can be found here.

Campbells Soup Reports Hedges as a Drag on Earnings

Just to demonstrate that folks in other industries "guess wrong" too...

CHICAGO (Reuters) - Consumers looking for relief from rising food prices are not likely to see any price cuts soon from Campbell Soup Co (CPB), which is still dealing with high commodity costs under previously set contracts.

Sales of the world's largest soup maker have been helped by consumers eating more at home, and the company sees little need to cut prices, especially while margins remain under pressure, CEO Douglas Conant said at the Reuters Food and Agriculture Summit in Chicago.

"Quite frankly, sales are growing, our marketplace presence is growing, consumer purchases are actually growing faster than sales," Conant said. "Clearly we're having a good year, we've had the best year in soup that I've experienced in my nine years here."

"So it's not likely we're going to be reducing prices in the near term."

But Conant also said that strategy could change if commodity prices come down and margins improve.

Like many food companies, Campbell locks in some costs for grains and other ingredients through commodity hedges. The company hedged some commodities when prices were at historic highs last year and those hedges run until July, Conant said.

"As those hedges come off and if our margins start to turn around, then we'll reconsider that, but that's premature to talk about," Conant said about the possibility of lowering prices.

"We're hopeful our margins will improve in the second half but for the full year, at best they'll be flat," Conant said. "So we won't recover everything we lost in the first half."

But do you see the concept of sticky margins in action?

Hat tip to DealBreaker.

B of A Chairman Ken Lewis Speaks Out

Here is a link to an op-ed piece from the Wall Street Journal that was penned by Ken Lewis, Chairman from Bank of America. Of course, Bank of America has a vested interest in what happens from here - with its shares currently trading at $3.75. Even still, Mr. Lewis attempts to put a glass-is-half-full spin on things and dispel the rumors that the market takes for reality.

Mr. Lewis debunks six widely held myths in his letter. Here are my favorite three:

- The banks aren't lending. This claim is simply not true. Yes, banks have tightened lending standards after a period in which standards were too lax. But, according to Federal Reserve data, bank credit has actually increased over the course of this recession, and business lending is trending up modestly so far in 2009. Also, mortgage finance volume is booming as a result of low interest rates. What's gone from the system is the easy credit that got us into this mess, as unregulated nonbank lenders have disappeared, and the market for many asset-backed securities has all but dried up. Most banks are making as many loans as we responsibly can, given the recessionary environment.

- The banks are insolvent. In the past 18 months, we've seen fewer than 50 bank failures. That compares to about 2,000 failures or closings of commercial banks or savings institutions between 1986 and 1991. There may be more to come, but the vast majority of banks will weather this economic storm.

- Taxpayers have given the banks billions and won't get their money back. TARP funds are not charity. Banks that received TARP funds will make about $13 billion in dividend payments to the U.S. Treasury this year. TARP funds are loans yielding anywhere from 5% to 8% interest. This is a win-win: Banks are getting the capital they need, and taxpayers are getting a strong return on their investment.

Brainstorming on Banking

The Ultimate Team Player

First, an apology. I have slacked off over the past three weeks or so, actually I am in the middle of a certification class to be able to teach MBA classes on line, and the certification is kickin' my butt. The coursework has really gotten in the way of my ability to write and post. I am still reading - but can't report. Not to worry, I only have one more week of the 6-week course left - and I am loaded for bear tonight with about 6 worthwhile posts. I will sit here until I fall asleep on the "f" key - as I have done once or twice before. So, without further adieu...

My first posting regards a weekend article from the New York Times on Shane Battier. (Yes, the basketball player.) It turns out that Mr. Battier is the ultimate team player - not measured by statistics but rather by his team's winning when he is on the court. The article is a long one, and it is by one of my favorite business authors - Michael Lewis (of Liar's Poker fame). Lewis spent many weeks on the best seller list with Moneyball. This article is similar, but it essentially makes the point that basketball is the most selfish professional sport - because every statistic tracked (points, assists, rebounds) is a selfish one. That is, the player might choose to rebound a ball (and recieve credit) or to deflect the ball to an open team mate to start the fast break (no credit).

Why do I post it here? It made me think about the necessity for an organization to have role-players that are not looking for the credit and high profile. Harry Truman once said "It is amazing what can be achieved when no one cares who gets the credit." Shane Battier doesn't score, or rebound, or assist particularly well. But he wins, and he helps his team win.

Enjoy the article. A selection follows:

Battier’s game is a weird combination of obvious weaknesses and nearly invisible strengths. When he is on the court, his teammates get better, often a lot better, and his opponents get worse — often a lot worse. He may not grab huge numbers of rebounds, but he has an uncanny ability to improve his teammates’ rebounding. He doesn’t shoot much, but when he does, he takes only the most efficient shots. He also has a knack for getting the ball to teammates who are in a position to do the same, and he commits few turnovers. On defense, although he routinely guards the N.B.A.’s most prolific scorers, he significantly ­reduces their shooting percentages. At the same time he somehow improves the defensive efficiency of his teammates — probably, Morey surmises, by helping them out in all sorts of subtle ways. “I call him Lego,” Morey says. “When he’s on the court, all the pieces start to fit together. And everything that leads to winning that you can get to through intellect instead of innate ability, Shane excels in. I’ll bet he’s in the hundredth percentile of every category.”

There are other things Morey has noticed too, but declines to discuss as there is right now in pro basketball real value to new information, and the Rockets feel they have some. What he will say, however, is that the big challenge on any basketball court is to measure the right things. The five players on any basketball team are far more than the sum of their parts; the Rockets devote a lot of energy to untangling subtle interactions among the team’s elements. To get at this they need something that basketball hasn’t historically supplied: meaningful statistics. For most of its history basketball has measured not so much what is important as what is easy to measure — points, rebounds, assists, steals, blocked shots — and these measurements have warped perceptions of the game. (“Someone created the box score,” Morey says, “and he should be shot.”) How many points a player scores, for example, is no true indication of how much he has helped his team. Another example: if you want to know a player’s value as a ­rebounder, you need to know not whether he got a rebound but the likelihood of the team getting the rebound when a missed shot enters that player’s zone.

There is a tension, peculiar to basketball, between the interests of the team and the interests of the individual. The game continually tempts the people who play it to do things that are not in the interest of the group. On the baseball field, it would be hard for a player to sacrifice his team’s interest for his own. Baseball is an individual sport masquerading as a team one: by doing what’s best for himself, the player nearly always also does what is best for his team. “There is no way to selfishly get across home plate,” as Morey puts it. “If instead of there being a lineup, I could muscle my way to the plate and hit every single time and damage the efficiency of the team — that would be the analogy. Manny Ramirez can’t take at-bats away from David Ortiz...

Some Snowy Reading

I checked out "The Snowball" from the library last week. Not having seen a copy of the book before, I figured it would take me a week to 10 days of committed reading to get through. Maybe not. This Warren Buffet biography is 800 pages of detail about the life experiences and thoughtful musings of the Oracle. I will definitely have to renew the book to get through.

However, I found a few excerpts from the book at the Financial Times website, FT.com. In lieu of reading all eight hundred pages, these selections do well to give a flavor for the man and his world.

Part 1

Part 2: (here's a selection from this selection)

Warren Buffett and Bill Gates met for the first time over the Fourth of July holiday in 1991, when Katharine Graham, chairman of the Washington Post, and her editorial page editor and friend Meg Greenfield had dragged Buffett to Greenfield’s house on Bainbridge Island for a long holiday weekend. To Buffett, a weekend on an island a half-hour ferry ride from Seattle that could be escaped only by boat, seaplane, or hitching a ride over the bridge by car was an “anything for Kay” event. Greenfield had also recruited him for an all-day visit at the nearby four-house compound on the Hood Canal that Bill Gates had built for his family. Gates, 25 years Buffett’s junior, was appealing to Buffett mainly because he was known to be brilliant and because the two of them were neck-and-neck in the Forbes rich-list. But computers looked like Brussels sprouts to Buffett; no, he did not want to try them this once. Greenfield, however, had assured him that he would like Gates’s parents, Bill Sr and Mary, and that other interesting people would be there. With some reluctance, Buffett had agreed to go.

On the morning of Friday, July 5, Buffett pulled on a cardigan and arranged his wayward hair into a neat, gray comb-over. Greenfield crammed five of them into her little car for the 90-minute drive to the Gates compound. “While we’re driving down there, I said, ‘What the hell are we going to spend all day doing with these people? How long do we have to stay to be polite?’ ”

Gates had similar feelings. “I had a constant dialogue with my mom,” he says, “which was, ‘Why don’t you come to the family dinner?’ ‘No, Mom, I’m too busy, I’m working.’ So she told me Katharine Graham was coming, and Warren Buffett.” He was interested in meeting Graham, now a 74-year-old legend who had softened into an older but still patrician figure, like a witty version of Queen Elizabeth, but, “I told my mom, ‘I don’t know about a guy who just invests money and picks stocks. I don’t have many good questions for him; that’s not my thing, Mom.’ But she insisted.” Gates flew in on a helicopter so he could make a quick getaway. When a tiny car pulled up, he was surprised to see a group of famous people – Greenfield and her guests – pop out like a gang of circus clowns.

Graham was taken over to meet Gates, who looked like a recent college graduate, in a red sweatshirt over a golf shirt, his collar turned up in a little saucer around his neck. While Gates was arranging for Graham to take a seaplane ride, Buffett was introduced to Bill Gates Sr and his wife, Mary. Then Bill Gates III, known as Trey, was brought round to meet Buffett.

Observers kept a weather eye on this introduction. Gates was well-known for unleashing his impatience on things that didn’t interest him. Buffett no longer walked off to read a book when he was bored but had a way of disentangling himself quickly from conversations he wanted to exit.

Buffett skipped the small talk; he immediately asked Gates whether IBM was going to do well in the future and whether it was a competitor of Microsoft. Computer companies seemed to come and go, and why was that? Gates started explaining. He told Buffett to buy two stocks, Intel and Microsoft. Then he asked Buffett about the economics of newspapers, and Buffett told him that they had got worse, because of other media. Within minutes the two were immersed in conversation.

“We talked and talked and talked and talked and paid no attention to anybody else. I started asking him a whole bunch of questions about his business, not expecting to understand any of it. He’s a great teacher, and we couldn’t stop talking.” They were starting to attract attention. “We were sort of ignoring all these important people, and Bill’s father finally said, gently, that he’d prefer that we join in a little more.

“Bill started trying to convince me to get a computer. I said I don’t know what it’s going to do for me. I don’t care how my stock portfolio is doing every five minutes. And I can do my income taxes in my head. Gates said he would pick out the best-looking gal at Microsoft and send her to teach me how to use the computer. He would make it totally painless and pleasant. I told him, ‘You’ve made me an offer I almost can’t refuse, but I will refuse it.’ ”

At sunset the helicopter had to leave. Gates did not go with it.

“Then at dinner, Bill Gates Sr posed the question to the table: What factor did people feel was the most important in getting to where they’d gotten in life? And I said, ‘Focus.’ And Bill said the same thing.”

Heating Oil and Propane Dealers will Benefit Greatly from a Tax Cut Stimulus

It seems like everyone these days is paying close attention to the governmental stimulus package. It is for a good reason, though, as a shrinking economy means job losses and hardship for business owners trying to generate a return on their assets. And politicians and economists vary on the type and size of stimulus to offer. Should it be a works program? Should it be a tax cut? What will offer the best return of "invested" stimulus dollars?

Economists are divided on the payouts of different types of stimulus, but it is generally thought that a broad public works and infrastructure investment will yield an economic multiplier of one to two times the stimulus investment. That is, if one million dollars are invested, the GDP will increase by one to two million dollars. That range of rate of return is not particularly good. Using my personal finances as a litmus test, I ask for a more compelling return than simply "getting all my money back" when I invest.

Based on the work of Christina Romer (the chairperson of the Council of National Economic Advisors), we anticipate a much bigger multiplier for a tax cut - somewhere between 2.5 and 3.0 times the dollars invested.

Why? Because the government does not know the best place to spend money - but business owners do. Business owners like the men and women of our industry. If you had an extra 5% of cash flow, what would you do with it?

Would you take home more? Or maybe pay out larger salaries and bonuses to your employees to help them deal with these hard times? Each of these two options goose the economy by increasing consumer spending - as folks buy "stuff" from places like the Home Depot and "services" from people like the local landscaping company.

Would you use it to invest in additional capital items for your business? This is where the real and compelling bang for stimulus our buck is! Almost any business owner has the thought kicking around in his head "If I only had an extra $x dollars I could [buy that truck/build that plant/hire that person/invest in that new computer routing software] that would yield an immediate return to their business. When an asset is added to the business that can yield an acceptable risk-adjusted return, then the economy grows. This is true whether you are the local auto auction or the local heating oil company.

It is a challenge for government-types to think in the manner of the entrepreneur on a trillion-dollar scale. Finding worthy homes for the first couple hundred billion probably isn't that hard - but the returns diminish with the amount spent. As they say: "Easy Come-Easy Go."

So tax relief is coming to business owners throughout the nation. And your business is getting a raise. How will you employ the cash to grow your business and do your share for economic growth?

Two Great Web Resourses for Learning and Research

Here are two great resources for learning and growth. The first is www.academicearth.org. It offers streaming video of full lectures from colleges all over the nation (Stanford, Harvard, Yale) in all different types of classes. If you need to learn cost accounting - it is there. If you want to brush up on Plato's Republic it is there, too (in a two part series!).

Now the world is flatter and more democratic than ever as it regards the disemination of learning. Here is a lecture on venture capital from the Yale business school. The guest lecturer is one of the co-founders of the Blackstone Group, Steven Schwarzman.



The second website is www.scribd.com.

Scribd is a website where folks can post presentations, annual reports, and letters to share with the viewing public. Scrbd works best with stuff that is hard to find for the average joe - stuff that you had to have a reason to get and is not originally meant for publication to the widest internet audience. Here is a great piece on the Canadian Tar Sands.

Propane Comments from EIA - This Week In Petroluem

Propane Inventories Continue Much Lower
Primary supplies of propane continued their sharp descent last week, falling by 3.1 millions barrels to an estimated 47.5 million barrels as of January 23, 2009. Nevertheless, propane inventories remain more than 5 million barrels ahead of the same period last year despite the recent surge of winter storms across a wide swath of the country. The Midwest led regional declines with 1.5 million barrels last week, while the Gulf Coast reported the next largest drop with a 1.2 million-barrel decline. The East Coast and the combined Rocky Mountain regions showed similar declines of 0.2 million barrels during this same time. 

From this point, the equation is very simple: 

Cold Winter Weather = Bad Supply Problems 

Moderate Winter Weather = Supply Problems - especially in the Northeast

Above Average Temps = A chance to catch our collective breath 

Propane Shortages

Many retailers already have felt the pain of the current propane supply crunch. The industry began the winter heating season with inventories on the low side of average, and things have gotten [much] worse...quickly.

We should have seen it coming. The Harford Mills (NY) storage facility was bone-dry at the start of the heating season. And a significant portion of the market of Western NY and PA utilize this facility for winter supply. With this storage facility out of commission, customers had to look elsewhere for product, and the northern portion of the TET pipeline has been unable to supply the ratio to which dealers have become accustomed. Either due to this black hole in supply or to bad luck things have spiraled out from there, with locations from Delaware City, DE and Newington, NH to Todhunter, OH all having allocation issues and decreased deliverability. Rail product is one large snowfall away from delays and switchyard bottlenecks.

I would like to open this thread up to anyone who might be interested in commenting on the current situation. Let others know your situation, or what you have experienced, or the things you have heard in the market. Maybe the candid opinions or the stories that you post can help someone who reads them later. Remember...you can post anonymously.

From OPIS:

  In the news, propane supplies along the East Coast have grown increasingly tight this winter as pipelines, railroads and marine terminals struggle to overcome a long list of obstacles.

   Consequently, propane dealers are finding more restrictions in their ability to pick up loads and in some cases have not even been able to make customer deliveries. As a result, dealers have been sending transport drivers farther and farther afield to find product, regardless of the price.

   Signs that it could be a tough winter materialized in the fall, when the corn harvest was both late and wet. More propane than usual was consumed to dry corn sufficiently to put it into storage. On top of that, November was a cold month, and that had customers firing up their furnaces early in the season.

   The TEPPCO pipeline system, which is a major propane supply source to the Northeast, saw system reserves fall sharply in November as it saw propane consumed for both crop drying and home heating. 

   The Watkins Glen, N.Y., storage facility, which provides the system with an important supply cushion, has not been able to keep up and was eventually drained earlier this month, confirmed Rick Rainey, a spokesman with the pipeline. On Wednesday, TEPPCO announced it was implementing daily allocation and restricting tanker truck loading hours for Coshocton, Ohio, and all terminals to the east. 

   Prior to going on allocation, some TEPPCO terminals saw as many as 50 trucks lined up waiting to take a load that could take an hour or more to transfer.    Rainey said that TEPPCO is currently pumping 60,000 b/d of propane between its Todhunter, Ohio, terminal and Watkins Glen. The Todhunter terminal is not on allocation and has been a destination for some wayward transports.

   In the meantime, states are waiving trucker hours of service restrictions in order to keep the propane flowing. Waivers have been granted by New York, Maine, New Hampshire, Connecticut, Rhode Island and Massachusetts. Pennsylvania and New Jersey are mulling hours of service waiver requests from dealers.  

   But, TEPPCO is not the only pipeline with struggles. Earlier this week, Dixie Pipeline announced that its Apex, N.C., terminal was on allocation because its storage was depleted. Further details about the allocation were not immediately available at presstime. That said, Dixie plans to increase the Apex storage before the end of 2009, Rainey told OPIS. At least one Northeast dealer

sent trucks down to Apex to pick up product. 

   The winter that hit the East Coast and Northeast is one of the coldest in a decade, and that has put a spotlight on the weak links in the propane supply chain. Just how bad it's gotten was highlighted by an NBC-TV news report in the Rochester, N.Y., area which told of a propane dealer not able to obtain propane and deliver it to customers. 

   Waterborne imports of propane have been disrupted this winter. A ship was late arriving at the Sea-3 terminal in Newington, N.H., in early December. That seemed to be the first sign of later issues.  

   Terminals have increasingly seen delayed ship arrivals or short cargos. 

Harry Hanger, manager of supply risk management and marketing for Atlantic Energy, noted that he's expecting a half cargo to arrive on Jan. 24-26 to the Chesapeake, Va., terminal. He added that his supplier has been overwhelmed with demand for propane and has been balancing the cargos delivered to Newington, Providence, R.I., and Chesapeake. In the meantime, Hanger doesn't have any extra propane to sell and is holding customers to the contract limits.

   In addition, marine terminals find they are competing for spot cargos. 

Propane demand has been strong in Northwest Europe, and that has pulled product away from the U.S. market.

   On the refinery side of things, the news is also grim. One propane dealer reports that Philadelphia-area refineries are holding customers to 65% of contract. For instance, that means if a propane dealer could pick up 1,000 gallons a day, they can only get 650 gallons. 

   Valero's Delaware City refinery, which is normally a significant source of propane for the Delmarva Peninsula, has restricted loadings because its storage pit is empty, company spokesman Bill Day told OPIS. The firm is trying to meet customer needs by bringing in propane via rail.

   The pit at the Delaware City refinery leaks and will eventually be closed in 2010, at which point Valero will likely store propane in an above-ground facility, Day said. 

   In addition, propane dealers are nervous about the fact that ConocoPhillips' Bayway, N.J., refinery is slated to have turnaround maintenance start in mid-February. A call to Conoco was not returned by presstime. 

   From the rail perspective, tank car supply appears to be tight and deliveries slow, noted market observers. The Sarnia, Ontario, NGL storage hub has found propane supplies to be tight this winter. The hub is a significant railcar loading point, and with the hub under restriction, cars aren't moving as fast. 

   The saving grace in this winter's propane delivery freeze is that the nation is not short of propane. That's because petrochemical demand for product has slackened due to the slowing economy. So, inventories remain flush at the Conway, Kan., and Mt. Belvieu, Texas, underground storage hubs. The issue is getting the fuel to where it's needed.