The Woodward News

February 7, 2014

Propane price continues to rise

Rachael Van Horn
Woodward News

Woodward, Okla. — As the week of snow, ice and frigid temperatures draws to a close, a winter weary Oklahoma public begins to understand what it might feel like to live in Minnesota.

But exacerbating the feelings about the weather could be the price of propane, which has nearly doubled since the beginning of the winter season in October, according to the U.S. Energy Information Administration (EIA).

The average price in the U.S. in October was about $2.20 per gallon. Around the last week of January, when a protracted winter storm and other factors stressed supplies in the midwest and east, prices shot up sharply to more than $4 per gallon, according to EIA figures.

Propane is What?

"I have never seen the price of propane go this high or rise this sharply," said former propane hauler, Sammy Burch.

Burch hauled propane full-time for 5 years in Oklahoma and before that in Kansas, part-time for 10 years.

"I just wonder now how many old people on Social Security who are choosing to heat their homes instead of pay for their medications," Burch said.  

At present, there are approximately 400,000 propane customers in the United States, according to statistics from the Oklahoma LP Gas Commission.

According to Burch, the average home uses about 200 gallons of propane during a cold month.

"That's $800, if they are buying it now and I just don't know who can fit that to their budget," she said.

From Now On I'll Buy It Early

That reality is hitting many people who have not contracted with their local propane provider for a more stable price and instead are on a call-in basis for their propane needs, said Laverne Farmers Cooperative Manager Phil Welty.

Every year Welty signs a contract to the wholesaler where he purchases propane. The Mont Belvieu wholesaler agrees in a contract to sell the commodity to those, such as Welty and other cooperatives at the lower-off-season price.

"That's a way I can keep the costs down for my regular customers," Welty said. "If I sell all my contracted gas to people who call in but aren't regular customers, I won't have enough left at that price to service my regular customers who I have agreements with."

So, at present, if you were a customer signed up on a "keep-full" status, as it is called, with Laverne Farmers Cooperative, then you are still getting your gas for about $1.78 or so. But if you called in Thursday to get gas delivered and you have not established a relationship with a provider, you could pay up to $4.20, Welty said.

That system is common to most propane retailers, Burch said.

The Perfect Propane Storm

According to Welty, the cause of the propane kerfluffle is not as much about low supplies, although that is part of the equation, but more about transport of the commodity.

" Apparently there is a problem with a pipeline and they are having to truck so much of it out,"  he said.

Welty is right, said Richard Hess of the Oklahoma LP Gas Commission.

But there are many more ingredients to this "soup" of propane misery, he said.

Well it's kind of a perfect or imperfect storm, if you will," he said.

The real story begins way back in 2008, when the country was only exporting about 5 percent of its propane.

"We were and are producing more propane than we ever have and it's a valuable commodity and so we started exporting more of it," he said. "Now we export 20 percent of our production in the United States."

So the bottom line here is, there is less available for domestic consumption, he said. But the exportation didn't create the shortage. It's just one player in this "game of gas".

Fast forward then, to this fall when there was a record grain harvest in the upper midwest.

"But that grain was wet and it had to be dried," Hess said. "That required a massive amount of propane and they went into the storage supplies for it."

Hess said from there the "perfect storm clouds" just kept growing. Because a short month later marked the beginning of a record setting cold weather winter, where propane usage in homes was, and still is at a all-time high.

To put the icing on the cake, Hess added with a sigh,  pipeline troubles on the Cochin Pipeline, which carries propane from Canada through much of the upper midwest all the way to just east of Ohio, reduced the availability of the commodity to those states.

That means there are many more "dogs" lapping at the same proverbial propane bowl, Hess said.  And that's when prices begin to rise, he said.

"Because those states that usually get their propane from other suppliers couldn't get it, they began competing with states like Oklahoma, Kansas and Texas for the same propane," he said.

In recent weeks, Hess said, there have been more than 100 trucks lined up at the Mont Belvieu facility, which is near Houston, Texas. Usually this propane wholesaler sells to states whose customers are used to cheap propane.

But now, they have retailers from Iowa, Maryland and many other states where customers are used to paying higher prices for propane.

"So, you know where a lot of that propane is going to go," Hess said.

Help Is On The Way

According to Hess, on Dec. 4 Oklahoma Governor, Mary Fallin, already tipped off of the possibility of a propane shortfall at retail outlets, issued an executive order exempting propane transport drivers only from some of the Federal Motor Carrier Safety Regulations.

That allowed more trucks on the road without the requirements of obtaining certifications and licenses that are normally required by the state.

She extended the executive order Jan. 7 and again Jan. 31, as the situation had not resolved yet, Hess said.

That has helped defray some of the cost of transport, but prices really aren't coming down quickly enough to help those whose tanks have registered zero during this cold snap, Hess said.

For all the interesting information about why the price is so high, a reason doesn't really help the people whose tanks are nearing empty.

And many don't have the $400 needed to even get 100 gallons to see them through the coldest part of the winter storm that has settled into the area, said Brenda Wise of the Woodward County Department of Human Services.

According to Wise, DHS has begun early this year, the Emergency Crisis Assistance Program (ECAP), specifically because of the propane crisis.

"This usually happens once a year in March, Wise said. "But we are starting this year ahead of schedule because of this storm and because of the propane problems.

Wise said she already has several applications for assistance with propane and expects many more.

Those whose propane tanks are empty or near empty and who meet the income limits, can get assistance paying to have their tanks filled, she said.

To get the help, you need to make application at your local DHS office.

Wise said you must have your pay stubs available for income verification and meet the income limits which are: Household of one-net income of 1,053 per month; household of two, net income of $1,422, and a household of three-net income of $1,790.

Wise added that this program also helps with electric bills as well as other utility bills.