The Joplin Globe, Joplin, MO

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January 27, 2014

Drop in propane supply leads to price jump

CARTHAGE, Mo. — Barbara Spencer, who lives near Brooklyn Heights, is thankful that she bought her propane when she did.

“I bought it low when it was $2 a gallon,” she said. “I got 200 gallons. That cost me $400. It went to $3, and now it’s $3.50.

“If I had waited, 200 gallons would have cost me $700. I don’t know how we are going to do it if prices stay this high.”

Spencer was on hand last week when her neighbor, Thomas “Tom” Spencer, 92, a veteran of World War II, got 200 gallons of propane for about $2.95 per gallon.

“He’s lucky to get it at that price,” she said. “What’s a guy like Tom, who’s on a fixed income, gonna do if it keeps going higher?”

That’s a question that Tom Spencer’s son, Keith, is asking too.

He said his father is “on a very fixed income. What are these old people supposed to do? Two hundred gallons at $2.95 each comes to $590 — this close to the end of the month. It is more than he can afford.”

Some Missouri officials and others in nearby states in the Midwest are looking into the dramatic jump in prices for propane. Federal authorities also may be looking at the issue.

Demand has been boosted by record freezing weather at the start of this year and a record corn harvest last October and November that was wet. Large quantities of propane were used to dry out the crop. Another factor is increased demand overseas.

Domestic production increased to an estimated 17.8 billion gallons in 2013, from 15.2 billion gallons in 2008. The country exported an estimated 4.3 billion gallons of propane last year, compared with 800 million gallons in 2008.

Another factor limiting supply was the shutdown for much of December of the Cochin pipeline that stretches from Alberta, Canada, through the northern Midwestern states. The 1,900-mile-long pipeline transports 70,000 barrels per day.

Stocks of propane in the Midwest have been drained, and prices in the region are the highest since at least 1990. The national Propane Education and Research Council estimates that nearly 900,000 farms in the U.S. use propane, while about 6 million households use propane as their primary heating fuel.

Steve Ahrens, executive director of the Missouri Propane Gas Association in Jefferson City, said: “The issue is a continuing difficulty to get it to the people who need it. We had a low inventory going into the fall after a record draw from grain drying. Then came this weather that has not gone away. It’s not being replenished faster than it has been used.

“We’re not to the bottom, but we can see the bottom of the well.”

Ahrens said Enterprise Products, a big propane producer, has more product in the pipeline and has sent more trucks to the Midwest.

“We’ve heard that a cargo ship bound for the international market has turned around because of lack of demand there and higher prices here,” he said.

When will prices be closer to normal?

“It’s hard to say,” Ahrens said. “I don’t want to give anyone false hope. The forecasters say we are facing an extended winter through the first week of March. If that happens, there will be no break from an increased supply. This is a historic demand that has never happened before.”

Some schools, such as the Miller R-2 School District in Lawrence County, heat with propane.

Tracey Hankins, superintendent, said: “We are under contract for propane, which we got back in July for the whole year. I am happy about that, and our tanks are full. But I’m concerned that local families are having trouble getting propane. A lot of homes use propane heat.

“We have a vendor who lives in the district who is saying it will go over $4 a gallon. We have another vendor who is out of propane and is having trouble getting it. We’ve had some local families who have run into that.”

THE ASSOCIATED PRESS contributed to this report.



Rationing

SOME PROPANE VENDORS in Missouri are rationing the fuel to customers. Instead of getting 200 gallons, a customer gets 100 gallons. Though that is not cost-effective for the vendor, it ensures that someone else will be able to get at least 100 gallons. The volatile pricing has led many propane retailers to stop quoting prices to customers until they’re ready to deliver it.

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