Winter 2014 Propane Price Crisis

January 29, 2014 in Propane by Rich Piellisch  |  No Comments

It’s a Short-Term Weather-Related Phenomenon, Say Proponents,
More Autogas Would Boost Infrastructure, Reduce Seasonal Spikes

Abnormally high propane prices are the result of serious, but short-term influences and are likely to abate soon, say proponents of the vehicle fuel they market as autogas. And, they say, more use of propane autogas would improve the situation: vehicles run year-round, and would spur investment in the infrastructure that would help prevent winter price spikes like this one.

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The big bottleneck is Conway, Kansas.

The big bottleneck is Conway, Kansas.

Propane spot prices have topped $5 per gallon in some areas, with the frigid Midwest getting the worst. The Indiana Department of Transportation, which has some 1,200 propane-gasoline bi-fuel vehicles, is running them on gasoline only. Fleets are concerned, even in Oregon.

Sources agree that increased demand during a cold wet harvest season hit export-deleted inventories hard, making for supply shortfalls and, inevitably, higher prices as winter kicked in, replete with a record-setting “arctic blast.” The diversion of pipeline and railcar capacity to shale-related products has aggravated the propane situation too, says one expert.

Consumers and Farmers Bearing the Brunt

“All these things have just combined,” says Tucker Perkins of the Propane Education & Research Council. The result is higher prices and a scarcity of fuel hitting consumers and pig and poultry farmers in cold-weather areas.

For many this year, propane is proving to be costly.

For many this year, propane is proving to be costly.

“There is a legitimate concern regarding the availability of propane right now but the primary focus of our industry is to make sure that customers who rely on propane have the fuel they need,” says Stuart Weidie, president of both Blossman Gas and the Alliance AutoGas network of propane vehicle upfitter and fuel suppliers.

“Companies like Blossman Gas and our Alliance member network have had strong plans in place to deal with potential supply disruptions,” Weidie says. “The issue is not one of abundance but rather logistics of getting supply where it is needed.”

‘Not Where We Need It to Be’

“What we’re experiencing in the price spike is temporary in nature,” he says. “We’ve got plenty of gas but it’s not necessarily where we need it to be.”

“On a national level,” says Perkins, “We have way more propane supply than we have demand. We’re talking to lots of fleets who aren’t affected at all.”

“Longer term,” says VP Todd Mouw of Roush CleanTech, “propane supply from shale gas is at an all time high as is the amount of propane we export.”

In addition to the weather, he told F&F, the situation has been made worse by a “lack of qualified drivers to move the fuel from where it is plentiful,” like Mt. Belvieu, Texas, where availability has remained plentiful.

‘Normal Wholesale Levels in the Next 30 to 45 Days’

“This is a temporary issue, albeit critical,” says Mouw. The situation “will drive the propane industry to strategically grow its infrastructure for storage of movement of propane.”

Warmer weather ahead? More propane vehicles would mean greater investment in the infrastructure that would prevent seasonal price spikes.

Warmer weather ahead? More propane vehicles would mean greater investment in the infrastructure that would prevent seasonal price spikes.

Mouw says that more propane vehicles will help, as demand will become more even across the calendar, and infrastructure investment will increase.

“We expect the price of propane to go back to normal wholesale levels in the next 30 to 45 days as we enter into Spring, temperatures rise and consumer demand goes down,” he says.

“What we have been doing at PERC is what needs to be done,” says Perkins: encourage more propane autogas vehicles. “That’s the catalyst,” he says, “that creates the infrastructure investment that better sustains these winter peaks.”

“When propane returns to its historical advantage versus gallons over the past eight years of $1.35 per gallon,” says Stuart Weidie, “fleets will again enjoy its benefits.”


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Source: Fleets & Fuels interviews and emails

 

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