As the northeastern U.S. prepares for another major snowstorm along with extreme cold weather, residents and businesses are suffering from a shortage of propane.
Supplies of propane in the Northeast and Midwest regions took a hit during the recent "polar vortex"-induced cold spell, and deliveries to replenish the stocks have been hampered by poor weather.
Thats caused prices to spike for the fuel that nearly 6 million U.S. households rely on for home heating. Nationwide, propane prices averaged $2.86 per gallon last week, up 17% from the same period a year earlier, according to the U.S. Energy Information Administration.
Prices are even higher in some regions. Residential customers in New York state, for example, paid an average of $3.28 a gallon for propane last week, up from under $3 a gallon in December and 20% higher than at this time last year.
Several governors in the Midwest have already declared states of emergency, suspending rules limiting propane deliveries. Ohio Gov. John Kasich on Jan. 18 issued an emergency proclamation temporarily waiving rules that limited delivery hours for propane and heating oil. Kasich also activated the states national guard to assist residents affected by the shortage.
This will help get propane companies resupplied so Ohioans who use propane to heat their homes can stay warm, while also doing it safely, the governor said in a statement. Were also working closely with county officials to look out for people whose supplies might be getting low. I urge folks to look out for one another right now.
Ohio is the 17th state to declare an emergency, according to a report by NBC News .
The New England states, which have less storage capacity, have had trouble receiving propane deliveries by rail because of bad weather, as well. And propane deliveries will likely become more difficult as the latest winter storm racing up the Eastern seaboard could bring a foot of snow to major cities, including Philadelphia, New York and Boston.
Prices will likely climb even higher as another patch of extreme cold weather is expected. Temperatures will be 10 to 25 degrees below average across much of the country starting on Tuesday night. Temperatures below freezing could extend as far south as Memphis, Tenn., by Thursday.
The propane shortage has its roots in the Midwests farm belt, where record high corn crops this fall led to higher propane use. Farmers use propane to dry crops and tapped more supplies than usual thanks to the huge harvest and above-average rainfall.
At the same time, U.S. exports of propane were booming, leading propane supplies to fall to the lowest level since 1996, according to the Energy Information Administration. According to the Census Bureau, 5% of around 115 million households, or nearly 6 million, use propane as home heating fuel.
Apparently the record amount of natural gas being fracked is not enough to keep up with the combination of its use for drying crops plus the record cold spell in the northern US .
If there is a shortage it's because the US exported the propane.
That is not likely to produce shortages at home . Propane shipment is not a simple task . It requires special port facilities and tanker ships . As a result the totals are likely to still be low . After these new port facilities are built it will be another matter ...
The article explained the current shortages were due to 2 factors ... crop drying and cold weather . The exports were mentioned as an aside .
The article seems myopic IMO.
"U.S. shale threatens Saudi propane exports to Asia" , 22 Nov 2013, By Yuji Okada and Tsuyoshi Inajima, Bloomberg News .
Sounds to me, that if exports are large enough to affect the Asian market as an import, it's large enough to affect the US market as an export. US exports have affected prices and supplies world wide.
Propane boom pits U.S. exports against home heat, 24 Nov 2013, Bloomberg News
I won't bore thefolks with the entire article, read it if you are interested. But I will say, maybe corn drying (i.e.US demand)is a factor, but revenue from exportation is winning the supply/demand pull for resources. Money talks bullshit walks.
Thanks for the link . I was under the impression that it was difficult to export LNG without special facilities but apparently there are already some of those online & shipping :
So I will concede the point that exports are having an effect . It seems that there are several factors in the elevated prices : increased exports , increased crop drying and colder weather . Having them converge simultaneously on the supply is the problem . And since exports are only going to increase this implies that future shortages are likely ... barring a warming trend . Perhaps more US residents will now start praying for actual global warming ....;~P
Oil and Gas took a page from the Nuke power industry. They told us it would make our electric billsfade away, and then they started jacking the prices. I have no doubt that Natgas, et al,is being manipulated in similar fashion. In the beginning, you would have been right Petey, but now the industry is setting up for world distribution of our gas. Making US demand dependent on available supply, supply not earmarked for export.
Supply & demand of a scarce commodity have well established patterns . There is neither mystery nor manipulation involved . Its just business ...
As far as the nuke industry goes much of the price rise happened due to ecological concerns raising construction costs .
Thanks for the informative link MiG .
There seem to be quite a few unknown future variables in determining prices & availability of propane . For one thing the size of the corn crop plus the abundance of rain in that region led to a large increase in demand for crop drying .
In addition the new terminals for exportation of LNG are starting to become a factor . Even if the weather is predictable [Is the Farmer's Almanac reliable ?] there are still all the above open ended factors including the future price of crude oil . If this fuel was that predictable one could get very wealthy predicting its future direction ...
BTW , if industry can't afford to use propane wht are the substitutes ?
The problem with that statement is the commodity is not scarce, it is in abundance. That is evidenced by the original drop in price after fracking was first turned loose yearsago, because there was more than we needed, so the price bottomed out. The inventories were high and the demand was low domestically. When they were able to transport it and export it, thats when the dynamic changed. Now they could export it and the domestic supply suffered greatly. Due mostly to the higher price abroad.
With todays demand there is no logic, that will allow any of this commodity to be stored for very long, even for domestic consumption. If the export demand sells at a higher price, the domestic supplies will be used to meet that demand. There is no differentiation between the two. Again money talks bullshit walks. Capitalism and supply/demand in the purest sense.
There are 2 factors involved in the microeconomics of a commodity ... supply and demand . There is no such thing as abundance when there is large demand . One cannot use the terms "scarcity" , "abundance" etc without considering both the supply and the demand . They are relative terms .
There is also a time factor . Commodities which are expensive to store such as combustible gases are especially affected by both the availability of storage facilities and the rate at which they can be extracted from the ground ...
Again , there is no mystery in any of this . It is all just microeconomics which is highly quantifiable . The fact that I don't have the specific knowledge of the economics of storage facilities doesn't mean it isn't readily quantifiable .
Agreed . In foreign trade it has always been about capitalism . The only difference is that in the distant past they relied on trading goods rather than some medium of exchange . Now it is easier to have severe trade imbalances ...
To be fair the demands are different . The Almanac does not predict to the day , right ? Just general trends for the season ?
That's quite a lot of data ...
Out of curiosity what are the 7 regions ?