Propane price spike expected to send heating bills soaring

Propane inventories have fallen by 12.8 million barrels in the Midwest since Fall 2013

George Ford
Published: January 23 2014 | 2:00 pm - Updated: 29 March 2014 | 2:34 am in

The price of liquid propane, used by many rural Iowans to heat their homes and businesses, has been soaring in recent days as demand exceeds supply.

Harold Hommes of the Iowa Department of Agriculture and Land Stewardship said average retail propane costs crossed the $4 per gallon mark on Thursday. That would represent more than a doubling of the average price of $2 per gallon last week.

"We have a lot of propane in trucks and there are places that have crossed the $5-per-gallon mark," Hommes said. "W'e're up about $1.50 per gallon in the last 24 hours.

"Propane prices for January delivery at the Conway, Kan., trading and storage hub reached $4.37 a gallon on Thursday, more than double the price from last Friday. Propane at that time was trading at around $1.75 a gallon."

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.

Hommes said many propane suppliers were unable to replenish their tanks before the cold weather arrived in December. That left Midwest stockpiles 46 percent lower than the comparable week in 2013, when stocks stood at 18.9 million barrels, according to U.S. Energy Information Administration data.

The EIA cited logistical problems, including maintenance on the Cochin Pipeline bringing supply from Canada and rail transport disruptions, helping to curtail propane deliveries to the region.

Since the week ending Oct. 11, propane inventories have fallen by 12.8 million barrels in the Midwest, the EIA said, compared with an average drop of 7.3 million barrels during that period over the previous five years.

Jerry McKim, director of the Iowa Bureau of Energy Assistance, said he expects to see many more Iowans signing up in the weeks ahead for the low-income home energy assistance program or LIHEAP. He said the state has taken steps to try to meet the increased demand due to higher propane costs.

"As of today, we put an additional $600,000 into the Emergency Crisis Intervention Program," McKim said. "We raised how much we will pay for an emergency delivery of propane from $500 to $650. We've also been talking to the vendors to lower their minimum delivery from 250 or 300 gallons down to 200 gallons.

"Unfortunately, with the price of propane continuing to rise so quickly, that may be inadequate to cover the entire cost. It may require families to come up with additional funds on their own."

McKim said his agency has been talking with state lawmakers and members of the Iowa Congressional delegation about a potential supplemental appropriation. He said the issue has moved from an energy shortage to a public health issue with potentially dire consequences.

"I had a call Wednesday from a lady who couldn't afford a minimum propane delivery at any price," McKim said. "She and her three children spent the night huddled around their stove in a rural farmhouse."

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