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Propane for home heating is scarce and pricey

  • Article by: Tanzina Vega
  • New York Times
  • January 22, 2014 - 8:25 PM

With a second arctic blast barreling through most of the Midwest and Northeast this week, Americans who use propane to heat their homes are scrambling to deal with sharply higher prices and a limited access to the fuel.

Distribution problems have left swaths of the rural Midwest vulnerable to the cold, and governors in states from New Mexico to Maine have issued decrees to hasten propane delivery.

Roger Leider, executive director of the Minnesota Propane Association, said the situation “has reached extreme proportions right now. The run-up in price has been dramatic and the availability low.“

Wholesale propane prices in Minnesota are $3.75 per gallon, up from $1.55 four months ago, he said. Much of the increase has come in the last week or so.

Cold weather has drained supplies that already were tight after the corn harvest, Leider said. During the fall, farmers had a lot of wet corn and therefore made more use of propane-fueled dryers.

“There just wasn’t enough gas put away,” he said.

In central Ohio, the Morrow County emergency management director, Joe Edwards, said supplies of the propane, which is used by at least one-third of families in the county, were “dangerously low.” Edwards said he was working with the Red Cross to make sure shelters were available, although he had not yet received calls from families who had run out.

Demand and exports up

Distributors and analysts say the problem is twofold: a sharp increase in exports of the propane that has led to a spike in price, and substantially higher use of the fuel to dry grain that came in too wet to store that has made it hard to keep up with demand.

Jeff Petrash, the general council for the National Propane Gas Association, said that while “there is plenty of supply of propane,” the difficulty was getting that supply where it needed to be. About 7 million homes, mostly in rural areas that are not served by a gas pipeline, use propane for heat.

Domestic production has increased to an estimated 17.8 billion gallons in 2013, from 15.2 billion gallons in 2008, Petrash said. But offsetting the increased production is a robust export market, he said. The country exported an estimated 4.3 billion gallons of propane last year, compared with 800 million gallons in 2008.

Propane distributors like David Randall, the general manager for Apollo Propane, which serves thousands of customers in Ohio, said the tighter supply had led to wholesale price increases, to $2.20 a gallon from $1.10 a gallon a year ago. Prices for his customers, he said, have risen to nearly $3 a gallon from $1.90 a year ago.

While most customers are still able to heat their homes, Randall said, “Some will have trouble paying the bill.”

‘A lot of frozen homes’

Joseph Draeger, who has owned Draeger Propane in Antigo, Wis., for 20 years, said he was shocked by the price increases. “There are going to be a lot of frozen homes here shortly,” Draeger said. “It’s the single parent; it’s the older people that just don’t have that type of income.”

In addition, much of the fall corn crop was harvested while wet, forcing farmers and elevators to burn propane to dry their crops, further squeezing supplies. In response to the squeeze, federal and state regulators, hoping to quicken deliveries, have waived rules that govern how long delivery drivers can be on the road.

But many distributors said that those efforts were insufficient and that they were filling customers’ tanks halfway and sending drivers to terminals in faraway states to wait in lines for as long as 10 to 15 hours. “Ultimately, we’ll have to make more trips, and the gas is costing folks a lot more than they used to pay,” Randall said.

Draeger was critical of the increase in U.S. propane exports. “That blows my mind that we have no product here and these homes are about to freeze up and they are allowing exports,” he said.

One solution in the Northeast is the import of propane to supplement domestic supplies. Joseph Rose, the president of the Propane Gas Association of New England, said distributors there were getting shipments from Europe and Africa and blending that with domestic supplies in an effort to keep prices from rising too sharply.

Some consumers may have been able to mitigate these costs by buying propane in advance or signing up for a fixed price rate earlier in the year, but others are being hit hard by the increases, said John Foster, the president of Blue Flame Propane in Richmond, Mich. “There’s kind of the haves and have-nots in this propane business.”

“There’s people out there who are buying at $1.79 and have no idea that’s an issue,” Foster said. “They may get a little sticker shock when their gallons run out.”

Staff writer Mike Hughlett contributed to this report.

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