A residential and farm-size propane tank
The price of propane is skyrocketing, and analysts blame a shortage due to brutal cold in the East, pipeline outages and low inventories. The price jumped Thursday from around $2 a gallon to upwards of $4 a gallon in Nebraska.
The price for new customers at Sandhill Oil in Thedford was $5.10 Friday, up from just $1.90 a week ago.
“We are not even trying to deliver it (at this price),” a clerk said. “We hope people can hang on and the price will settle down in a week or so.”
Roy Hild at Hild Propane in North Platte also hopes the price will settle.
“I wish we knew what it will do,” he said. “It can’t stay this high. Too many people are depending on it.”
According to Reuters News Service, rationing is underway in some parts of the country. Truckers have received special permission to work longer hours to make deliveries.
Plenty of propane was produced this year in the U.S., but a considerable amount was exported, as suppliers searched for higher prices overseas. And, more propane than normal was needed to dry down a large grain harvest. Then record cold hit in the north and east.
These are the largest drawdowns of propane supplies in 20 years, according to the National Propane Gas Association. Consequently, the price is going up as suppliers take advantage of sharply increasing demand, and pay higher shipping costs.
In addition to seeking relief at the federal level, the propane association said it is working with officials within the transportation industries, asking that propane shipments be prioritized.
According to the U.S. Office of Energy Information, the average price in Nebraska Monday, just four days earlier, was $2 a gallon. That was up from $1.33 the same week a year ago.
The result is a financial shock to buyers who rely on it for heating, typically buying 200-300 gallons at a time.
Gerald Smith, who lives in the Sandhills, said $5 a gallon would translate into $1,500 for about three months of heating fuel.
“There is no way I could afford it,” he said.
The Propane Gas Association said the shortage stems from abundant grain crops throughout the upper Midwest that was harvested almost simultaneously.
“This was a large, wet crop which required massive amounts of propane in order to be dried prior to storage,” the association said.
At the same time, the Cochin pipeline, which provides 40% of propane used by Minnesota suppliers, was shut down for repairs and shipments from Canada were reduced because of railroad troubles. That drove demand all the way to Iowa, and it has grown from there, the association said.
The shortage requires longer driving distances and loading times, creating a scarcity of available product and delays in making deliveries.
During 2013, more than 20 percent of U.S. supplies were exported out of the country, compared to 5 percent in 2008.