Millions of Americans are feeling the pinch of a propane shortage this week as brutal cold exposes the supply vulnerabilities of a fuel that heats homes, schools and businesses across wide swathes of the United States.
Prices of the fuel, a liquefied petroleum gas, have rocketed to all-time highs in Midwestern states, distributors are rationing supplies, and some schools have shut due to a lack of the fuel during this year’s second bout of Arctic weather.
On Friday, propane heading for the Midwest changed hands at $4.30 a gallon – more than double its price just last Friday – although it had traded even higher at close to $5 a gallon on Thursday.
Distributors were quick to point out the absence of any reports of homeowners running out of fuel. But as a record-breaking freeze coincides with pipeline outages and low inventories, the crisis is expected to linger.
“It’s not a permanent shortage and we won’t run out, but there are no avenues to deal with this shortage today other than a break in the weather,” said Brandon Scholz, managing director of the Wisconsin Propane Gas Association.
“We could be sitting in this situation to spring.”
Most households are not connected directly to propane pipelines, and the system relies heavily on truck fleets now running at full capacity to get emergency supplies to states across the Midwest, Northeast and Southeast.
The U.S. Department of Transportation has issued emergency orders suspending the limits on the amount of time truck drivers can spend on the road for 10 Midwestern states and 12 Northeastern states, a rare regional order.
A spokesman for Pennsylvania-based AmeriGas, the largest U.S. propane retailer, said it was rationing deliveries to “small pockets” of Alabama, Georgia and Tennessee on Thursday, reducing supplies to 100 gallons per customer from the standard delivery of some 250 gallons.
“Supply is very tight. There is propane to be had out there, but there are supply and transport issues across the country,” spokesman Simon Bowman said.
All the while, federal policymakers representing the Midwest have heard complaints from constituents angry about the high fuel prices.
Iowa Senator Chuck Grassley called on the Federal Trade Commission to review the cause of a propane price spike in his state on Wednesday to “ensure that any supply shortages are not created artificially.”
RATIONING, PRICE SPIKES
U.S. propane production has grown in recent years thanks to the shale oil and gas boom, but the resulting higher supplies have caused domestic prices to sink below global levels. That in turn, has encouraged exports of the fuel from the U.S. Gulf Coast to Japan and Latin America, where prices are higher.
The shortage in the Midwest comes at a confluence of events: namely, record-breaking cold at the start of January, when stocks were already low after large amounts of propane were used to dry out a bumper corn harvest.
A pipeline outage during most of December exacerbated the situation, and this week’s freezing weather, expected to last to the end of the month, has heightened the situation.
All the while prices have soared. Propane heading for the Midwest is priced against supplies in the hub in Conway, Kansas. Prices there touched almost $5 a gallon on Thursday, compared with Friday’s pre-freeze price of around $1.75.
Texas has lifted the need for out-of-state trucks to be registered with the state to allow other trucks to come and pick up supplies.
“Long lines have formed at Mont Belvieu,” said one Houston-based broker, referring to the largest propane supply hub in the country. “Lots of out-of-state trucks are showing up.”
In northern Tennessee, the Stewart County School System opted to close on Thursday and Friday because of warnings from suppliers they were focused on deliveries to residences of up to 150 gallons, said Leta Joiner, assistant schools director.
“We’re not sure how long this is going to last,” Joiner said. “We decided to err on the side of caution.”
One propane supplier in northern Indiana said customers pleaded for more fuel when he did his rounds on Thursday. Other customers were more hostile, accusing his company of exploiting the shortage to raise prices.
A cold snap is stretching supplies of propane gas and causing transportation bottlenecks across a broad section of the United States, officials said Friday, sending everyone from rural educators to chicken farmers in search of enough fuel to keep warm.
Governors and federal regulators already have taken the rare step of loosening transportation rules for about 33 states in the South, Midwest and East to allow additional hours for truckers to deliver propane and keep up with demand, according to Jeff Petrash, vice president of the National Propane Gas Association.
The gas often is used outside metropolitan areas to heat homes and chicken houses and to fuel some manufacturing operations, and tankers from the Midwest are waiting in line for hours to fill up with propane at bulk storage locations in the South before heading back north. About 5.5 million homes are heated by propane, according to the U.S. Energy Department.
Prices are spiking, and many are worried that a propane crunch will worsen in coming days as temperatures get even colder and demand rises, sending prices even higher and stretching supplies further.
“I think the only answer is warmer weather,” said Marvin Childers, president of The Poultry Federation in Arkansas, Missouri and Oklahoma.
Some are questioning what’s driving the spike in prices. U.S. Sen. Chuck Grassley, R-Iowa, sent a letter Thursday to the Federal Trade Commission asking for oversight of the propane market. Grassley noted, as have many retailers, that the price for propane at Conway, Kan. — one of two primary propane storage sites in the United States — has been significantly higher than the price at the other site, in Mont Belvieu, Texas.
“I request that the Federal Trade Commission remain vigilant in overseeing the propane market to prevent possible anti-competitive behavior or illegal manipulation, and to ensure that any supply shortages are not created artificially,” Grassley said in his letter.
Running low is already a concern in some places. School officials in Alabama’s mountainous DeKalb County were surprised to receive a letter from a major supplier saying the company was cutting off commercial deliveries because of supply problems, said assistant superintendent Brian Thomas.
Thomas said officials were able to find another company that topped off propane tanks at four schools that rely on propane for heat, but administrators are now trying to cut back on usage to make sure the supply lasts.
“I’m working on an email right now asking principals to conserve as much as possible,” Thomas said.
Propane supplies were lower than normal before the cold weather partly because farmers had to use an unusually large amount to dry grain before storage. The government said propane supplies dropped to the lowest level ever during the second week of January.
The National Propane Gas Association said it is working with the transportation industry to prioritize shipments of propane.
In Kentucky, where snow and freezing temperatures are predicted through late next week, the propane industry is asking people to alert suppliers if storage tanks fall to 35 percent of capacity to ensure they get a refill before running out.
Meanwhile, agriculture leaders say some farmers in poultry states including Alabama, Arkansas, Georgia, Kentucky, Mississippi, Ohio, Tennessee and Virginia have had to stop taking deliveries of baby birds because they’re unsure whether they will be able to get enough propane to keep houses around 90 degrees, which days-old chicks need to thrive.
“This is happening all over. It’s one of those perfect storms we couldn’t foresee a month ago,” said Johnny Adams, director of the Alabama Poultry and Egg Association. The state’s $15.1 billion poultry industry has some 2,500 producers and each week hatches 24 million chicks, all of which have to be kept warm.
Childers, whose office is in Arkansas, said propane prices jumped from about $1.80 a gallon to nearly $5 by Friday. The whole poultry industry could grind to a halt if growers can no longer afford propane to keep birds warm, he said.
Tennessee, which is among the states that have let truckers drive longer hours to allow suppliers to make more deliveries, relaxed rules to ensure that propane can get to consumers from supply terminals, where plenty of the gas is available, said Emergency Management Agency spokesman Dean Flener.
“We’ve heard of localized issues of somebody running short, but the Tennessee Propane Association has worked to get that supply there where it’s been needed,” he said. “We’re not seeing a shortage, but we’re seeing high demand and trying to do what we can to get the supply that’s there to meet it.”
Florida isn’t having the same issues because of warmer temperatures, but supply problems could spread if the cold weather continues, said Kim Barber, a spokeswoman for the Florida Propane Gas Association.
In Missouri, some lawmakers were calling for an investigation into the low supply and high prices. State Sen. Mike Parson, R- Bolivar, said he suspects big companies may be trying to boost profits by artificially lowering the supply.
“I hope they prove me to be wrong,” he said. “I just don’t think there is any doubt about it. There is not any question they are going to make millions of dollars.”
The past two winters, I could not afford propane, which amounted to $600.00 per fill. This needed to be done 2-3 timers each month to keep my home warm. Since I couldn’t afford even close to this amount, I froze…literally. I have permanent nerve damage. I pretty much hibernated in my bedroom with a space heater for two winters. I understand the farmers need to keep their chickens warm at 90 degrees. That’s a LOT of propane. With propane, my home never gets warmer than 65 degrees in the winter..with two space heaters on full force. My point is….aren’t people more important than chickens? And, isn’t our so-called government supposed to take care of its own before sending billions of dollars worth of propane to other countries? YEP….GREED. Pres. Obama spends over $100,000.00 on the groom and care of his stupid dog. That would buy a lot of propane for us. People who have much…don’t understand those of us who don’t. Sad, really.
Assuming the shortage isn’t originating at oil refineries (Propane is one of the first fuels to come out of the crude) then like the article says, heavy consumption and limited distribution. When your whole distribution system relies on rolling stock, be it trains are trucks, and then you have whether the closes the roads, shortages are inevitable.
Apparently, it must be a Northeast regional problem. I live in the Desert Southwest and just paid $2.47 a gallon, delivered, yesterday – which is higher than the $1.90 I was paying in November, but still a far-sight short of $4-$5 a gallon! Lot to be said for having a 500 gallon tank, and filling it ONCE in the fall before snow flies. My cabin is 1200-sq ft., and I can stay warm, hot water, and plenty of gas for cooking for at least 5-6 winter months on a tank (I normally fill a partial in the spring for cooking and water heating).