Woodward, Okla. —
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.