Propane gets pricey, supplies are short|
|Joe Draeger was harassed this morning when he said, “everybody is in the same boat.”|
He sells LP gas in the northwoods area through Draeger Propane and is being constantly called as customers run out — or nearly out — and the cost goes through the roof.
Wisconsin and other Midwestern states are scrambling to address a deepening shortage of the home-heating fuel propane just as another cold snap envelops the region, threatening to strain supplies that are already at historic lows.
Demand has been boosted by the combination of record freezing weather at the start of this year and a late, wet, record corn harvest last October and November, when large quantities of propane were used to dry out crops.
Propane stocks have been drained and prices in the region are the highest since at least 1990.
Locally, Draeger is limiting customers to 100 gallons per what he formerly called a “fill,” and with temperatures stuck below zero and wind chills deep into the minus territory, the fuel goes quickly.
Draeger runs three tanker trucks and they have been making the rounds attempting to get filled, and sitting in line for hours at the terminals is not unusual.
He sent one of them to Minneapolis, and it took 16 hours for the fill.
Once back in Antigo at the terminal, the fuel went quickly to customers even at the 100 gallon limit.
Draeger said he feels very sorry for his customers hit by higher prices and a shortage of gas in their tanks.
“There is simply no product,” he said.
And what there is out there is priced through the roof and it seems to be going up constantly.
“This morning, in Antigo, it was costing $4.20 per gallon,” Draeger said, which puts him in an very troubling position because he has contracts signed months ago for less than $2 a gallon.
Those figures were put in place before the fuel companies cut his allocations so deeply.
“I’ve never seen anything like this. We are working to keep our customers with fuel,” he said, adding that it is getting increasingly difficult.
To allow greater and quicker deliveries to rural homes and farms, several states, including Michigan, Indiana and Ohio, have suspended "hours of service" rules that limit the hours truck drivers can spend on the road, according to state notices collated by the National Propane Gas Association.
"There are no strategic stockpiles around the country like there are for crude oil," Roy Willis, president and chief executive officer of the Propane Education and Research Council, told the Reuters News Service. "It's all in the private sector. Getting that replenished is a logistical challenge and that's what we're facing now."
"What the industry is doing is literally working round the clock to move propane from where it is, in the large storage facility in Texas, using trains and trucks, pipelines and barges to where it is needed. That's what's happening now."
Some 14 million households use the liquefied gas to heat homes, especially in upper Midwestern states such as Wisconsin, Michigan and Ohio, where the shortages have had the most impact.
Homes tend to have their own propane storage tanks and are not connected to pipelines, making truck transport particularly important for residential deliveries.
Propane stocks fell to 11.5 million barrels as of Jan. 10, half of what they were a year earlier and the lowest for this time of the year since the government began collating propane data in 1993, Energy Information Administration figures show.
In addition to the weather, inventories have also been stretched by short-term logistical problems and a long-term shift toward exporting more liquefied petroleum gas, production of which has surged due to the shale revolution.
Propane is often found mixed with natural gas and oil in tight shale wells, and is separated out by refineries or in gas processing systems. Output is historically high and prices lower than in other countries, encouraging exports.
The 1,900-mile, 70,000 barrel per day Cochin pipeline from Alberta through the northern Midwestern states was shut for much of December, limiting supply, the Energy Information Administration said last week.
Mont Belvieu in Texas is home to the largest storage point for propane, while Conway, Kansas, is also a pricing hub.
The Energy Information Administration said last week that prices in the Midwest must rise if there is to be an incentive for producers to keep supplies at home rather than selling abroad.
The price rise may not last long, one trader said.
"The Conway, Kansas, hub is not that liquid, so prices can move faster because of the low volume and fewer participants than in Mont Belvieu," an LPG broker on the Gulf Coast told Reuters.
"I think the price spike will be short-lived. Typically, the sellers come out to get the elevated prices and I don't see anything major in the system preventing supply to get there."
Propane trucks line up at a gas terminal waiting to get loaded. Joe Draeger of Draeger Propane provided the photo, and said the wait is 12 to 18 hours for a load.
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