Propane shortage won't end until temperatures moderate

Prospects for relief from Minnesota's propane shortage remain dim as long as the thermometer hovers at below-average temperatures, experts said Friday.

That is not good news to the 250,000 homes, businesses and farms in Minnesota that use propane as their main fuel for heat.

Indeed, Gov. Mark Dayton's executive council on Friday unanimously extended for an extra 30 days his emergency order to alleviate the state's ongoing propane shortage.

"This is going to be day by day, week by week," Dayton said. "It's just very hard for the system to catch up because it's constrained to what present demand is."

Propane suppliers who started the winter with lower-than-usual levels of the heating fuel have simply been unable to catch up with demand in Minnesota and the rest of the polar-gripped Upper Midwest as below-zero readings ratchet up consumption and price.

"That's the driving factor," said Roger Leider, executive director of the Minnesota Propane Association, about the weather. "We haven't been able to catch a break."

And the immediate forecast is not exactly balmy.

Meanwhile, according to a weekly EIA price survey, propane was selling for $4 a gallon across the U.S. last week, compared with $2.30 a gallon a year ago at this time.

In Minnesota, propane prices this week averaged $4.67 per gallon, with the highest price at $5.90 a gallon and the lowest at $3.11 a gallon, according to the Minnesota Department of Commerce.

Commerce Commissioner Mike Rothman told the executive council that prices have risen from an average of $1.60 per gallon to a recent one-day spike of $6.67.

"Obviously for senior citizens and people dependent on small budgets, those prices are devastating." Rothman added. "What we have seen, for example, is shortages at people's homes. Their propane tanks are being drawn down to 30, 20, 10 percent and we're starting to hear that they're out in places."

Despite that, Dayton said there's not a shortage of propane in the country, rather that distribution and infrastructure simply can't handle the capacity necessary to meet the current demand.

Still, Rothman said, "We're going to be tight." That amount of money is intended to assist 140,000 Minnesota homes through April and May, even without a crisis situation.

Propane, which is produced from both natural gas processing and crude oil refining, is stored in salt caves. Most of the propane consumed in Minnesota comes from an underground reservoir in Kansas.

But some Minnesota propane providers have sent trucks as far south as Texas to pick up the fuel for their customers back in the state.

Walt Breitinger, a commodity futures broker with Breitinger & Sons, said natural gas futures prices have risen from $3.50 per million BTU in November to $5.50 per million BTU for March contracts.

"Overall, the natural gas supply is relatively abundant but we are seeing spots that can't get gas and the price spiked," Breitinger said.

"Summer didn't come until June and April and May were colder than normal and people were still using [propane]," Leider said. "Those are months when suppliers build up inventory for winter."

Spring planting also was delayed because of the weather, which resulted in wetter-than-normal crops in the fall that had to be dried by propane heaters.

Even with those aberrations, the underground propane supply in Kansas was in the average range for the last five winters.

"But this year hasn't been average," said Leider.

Minnesota's State Emergency Operations Center is also coordinating with other agencies to set up warming shelters should residents be unable to fill their propane tanks. The State Emergency Operations Center Hotline is at 1-800-657-3504.