Propane Shortage Leads to Price Surge in Midwest USBy: Brian Powell - January 27, 2014
Much fuss has been made about the polar vortex that swept across the US this winter, bringing with it the lowest temperatures the United States has seen in decades. The Midwest, Northeast, South are the areas which have been hit the hardest. Because of these unnaturally cold temperatures and above-average amounts of snowfall, everyday life in these areas has essentially come to a halt. Businesses and schools have been closed, roads have been impassable, and energy bills have been through the roof. (Yeah, I’m looking at you, Delta.) Unfortunately, it looks as if the situation is going to get worse before it improves.
A combination of factors has led to a shortage in propane supplies here in the United States. Despite the fact that production of propane has grown quite a bit in the last few years, supplies are lower due to higher exportation of propane to international countries in which supplies are low (Japan and Latin America, in particular). Not only have supplies been affected by higher exportation, but last year’s corn harvest in October drastically cut into propane supplies. According to the US Energy Information Administration (EIA), “For corn to be stored, it first needs to be dried, using large-scale heaters that often use propane for fuel. A late-2013 corn harvest, along with cold wet weather, resulted in strong demand for propane at distribution terminals in the Upper Midwest.”
In December, a 1,900 mile long, 70,000 barrels per day pipeline from Alberta, Canada to the Midwestern states in the US was shutdown for maintenance. This, coupled with the fact that another pipeline in Canada exploded this Saturday, has crippled the supply of propane here in the US.
The worst culprit, however, has been the freezing temperatures. Throughout January, temperatures have been lucky to climb out of the 20’s in the Midwest and Northeast, with certain areas in the South even seeing sub-zero highs. As the temperatures go down, thermostats have a tendency to go up. As a result, consumers have been using much more gas to heat their homes, resulting in an emergency-declaring energy shortage.
“It’s not a permanent shortage and we won’t run out, but there are no avenues to deal with this shortage today other than a break in the weather,” stated Brandon Scholz of the Wisconsin Propane Gas Association. Wisconsin is one of 24 states that have declared an energy emergency, a declaration which lifts the regulations on how many hours a truck-driver can stay on the road in one trip, extending drive-time from 11 to 14 hours.
Short supplies also carry an increased price, something which has made propane customers irate. On Friday, propane in the Midwest was priced at $4.30 per gallon, surprisingly down from its peak at $5 per gallon. To put this figure in perspective, before the freezing temperatures hit, the average price of propane was $1.75 per gallon.
The increase in prices has led many people to wonder if gas companies are taking advantage of the weather and have started price gouging. Iowa Senator Chuck Grassley has gone as far as asking the Federal Trade Commission to review the change in prices to “ensure that any supply shortages are not created artificially.”
For now, the only advice to get through this energy crisis seems to be to simply turn the thermostat down and bundle up. That is until Fox decides to bring Hank Hill out of retirement to save the day.
Image via YouTube