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Propane problems

High and sustained demand the culprit

Published: Wednesday, Jan. 29, 2014 3:20 p.m. CDT • Updated: Wednesday, Jan. 29, 2014 3:25 p.m. CDT

PRINCETON — The national propane supply shortage is a concern to local energy companies and their customers.

On Wednesday, Ag View Energy Marketing Manager Clement Weborg said Ag View is keeping its propane customers supplied with their propane, but there has been a large depletion in the available propane inventory supply.

The problem is more with the delivery of propane from the production or storage areas to the local business, Weborg said. Ag View typically uses several terminals in Illinois, but due to the extremely high demand and the sustained demand of the past three or four months, Ag View has sent trucks to Kansas and Mississippi to augment the meager supply in Illinois. Normally, there is no problem with Illinois having a sufficient supply, he added.

Looking at some of the reasons for the high and sustained demand for propane, Weborg said last fall’s drying season for harvest was unique because harvest is usually staggered throughout the Corn Belt, but not this year. Everyone was basically harvesting at one time. Also, with the extremely wet crop, more propane was needed for the corn dryers. Plus, some of the harvest went into December.

Coupled with the increased and longer need for propane during harvest, the home heating season started early this year in November. With the extremely cold temperatures continuing this winter, the demand for propane has been ongoing, giving little chance for production to catch up, Weborg said.

Because of this demand, there has been a huge increase in costs on the production side, which is passed on to the local business. It’s not the local company that is driving the cost increase, but the production end, Weborg said. There is also the increased transportation costs for companies. The local company cannot absorb those cost increases and has needed to pass some of that increase to its local customer, Weborg said.

Cost to the customer has slightly more than doubled, Weborg said. To help, Ag View Energy is working with customers on a “short sale” option of not filling the tank fully to see if prices ease up a bit.

Though propane prices do seem to be easing a bit, Weborg said the tight supply of propane will be around until the weather turns warmer and the furnaces quit running.

Steven Michlig, owner of Michlig Energy of Manlius, agreed the supply of propane is there but definitely has been diminished. Not only has the extremely cold winter weather caused an increased demand for propane, there is also the factor that other countries are willing to pay more for propane. Therefore, propane is getting exported. It’s a supply chain issue more than anything, Michlig said.

There are also pipeline issues with getting propane where it needs to go, Michlig said. For instance, one pipeline was down for maintenance, while another pipeline was being used to ship other things, he said.

So far, Michlig Energy been able to get a sufficient supply to meet the needs of its customers without going out-of-state, Michlig said. The Department of Energy has released information saying the propane inventories are the lowest seen in about 20 years, he added.

Concerning the costs for the local customer, Michlig said the price for a gallon of propane has gone down from $5 to closer to $3.50. But by the end of the day on Wednesday, Michlig expected the price to increase to closer to $4 a gallon.

“Prices remain volatile,” he said.

Comment on this story at www.bcrnews.com.

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