Propane Shortages Leave Many Without Heat

Shortages of propane around the country have left many with sky-high energy bills, or worse, without heat at all. Propane prices have jumped from a national average of $2.31 per gallon at this time last year, to $3.89 in January 2014. Inventories of propane are half of what they were at this time last year, even though production of propane is up 15% on the year. And as a stretch of cold weather continues over much of the eastern half of the country, many people are having to make difficult choices about how to heat their homes and businesses.

The causes of the shortage are not entirely clear, especially considering natural gas production continues to rise, but there have been several factors. Propane, a product obtained during oil and gas drilling, usually experiences consistent demand. However, the cold winter has driven demand to unusual highs, and inventories have been drawn down as a result. Another reason is that farmers used five times the normal amount of propane this past year in order to dry out corn. The farm belt had a banner year, but much of the crop was wet from heavy rains, and propane is used to dry out corn.

Energy analysts also believe that exports have played a part. With the U.S. producing surpluses in natural gas and refined products, companies have moved to ship more overseas. Since 2010, exports of refined petroleum products have surged 60%. For propane, those numbers are even more staggering. In October 2013, propane exports surpassed 400,000 barrels per day for the first time ever, up from 150,000 barrels per day in January 2012.

Local price spikes have deviated from the national average as well, reaching as high as $5 per gallon in Missouri. Several states, including Iowa and Illinois, have issued disaster declarations, and some are calling on the White House to do the same at the federal level.

By. Joao Peixe of Oilprice.com