Recent spikes in propane prices have customers worried about how they will manage to keep their propane tanks filled this winter. The cost has risen 140 percent in the last two weeks because of a shortage of propane. Fuel companies and state and federal officials are looking for ways to bring the cost down, but it looks like rates will be high until weather warms.
Ouch! Homeowners and business owners heating with propane have been shaking their heads in disbelief and digging deeper and deeper into their pockets as propane prices have climbed to over $5 per gallon in Cook County.
A homeowner who didn’t want to be identified said, “What do I do? Pay to heat my house or pay my mortgage? I can’t do both right now with propane costing me so much.”
Fuel companies working with customers
Ryan Gunderson, president/owner of Superior Fuel Company, said world demand and U.S. exports to meet that demand are having a major impact on prices. That and the extreme cold.
“It’s been a very tough year for us and our customers,” said Gunderson. “We just had a delivery for a fill that cost the customer more than it normally would have for his entire year to heat his house. And who can afford that? I can’t. My parents just put in electric heaters to help cut their fuel bill.”
Gunderson notes that people who purchased a price protection plan are fortunate. “Right now, those enrolled in our price protection program are seeing a significant price reduction and have the peace of mind of knowing that they are going to get their propane.
“We are able to keep all of our customers supplied,” said Gunderson. “And we are offering them smaller amounts per delivery. We’re just kicking the can down the road until it warms up and the demand drops off and our inventories can be built back up. I can’t believe I’m saying this, but right now I have never looked more forward to spring.”
“The price of propane has gone up 140 percent in the last two weeks,” said Joe Stariha, co-president of Como Oil & Propane, who sounded as shocked as his customers.
“The average price for propane throughout the region right now is $4.99 per gallon. Where will it end up? No one knows, it’s anybody’s guess how much the price will go up,” said Stariha.
Wade LeBlanc owner operator of North Shore Oil & Propane said, “It’s tough right now. I’ve never seen it (propane) go up that fast. It’s unheard of, unprecedented.
“We’re trying to stay ahead of it. A good chunk of my day is spent just trying to find propane. Right now we’re trying to do what’s best for our customers. Because of the high price, we’ll give customers a partial fill if that’s all they can pay for and then monitor their tanks, but we feel bad for them.
“What will happen in two to three weeks when I get my bill for propane and I have to pay it and my customers can’t pay me? I don’t know what’s going to happen, and I know people don’t like government intervention, but something has got to change. This is bad for everybody. This is bad for the customers and the vendors as well. It’s a scary time, put it that way.”
Looking for solutions
What has caused the rise in price? Como’s Stariha explained, “The unseasonably cool temperatures and the late fall increased demand for drying corn has helped to create a nationwide shortage.”
On Tuesday, January 28, U.S. Senator Al Franken joined with Minnesota Governor Mark Dayton in asking the Obama administration to address the severe shortage of propane and do whatever it can to alleviate the problem.
“I welcome Governor Dayton’s fast action to deal with the propane shortage and his effort to lessen the harm it can do to Minnesota families and farm operations,” said Franken.
One of the problems the president faces is that propane isn’t stored in huge quantities like heating oil. There is no emergency excess to tap into in a crisis like this.
According to the National Propane Gas Association (NPGA), “Last week, the U.S. Department of Energy reported that cold weather led to record high natural gas storage withdrawals, as well as propane. These are the largest drawdowns in the 20-year history of the survey and the second time this year the record has been broken.”
Another contributing factor was the recent shutdown of the Cochin pipeline, which provided 40 percent of the product used by Minnesota suppliers. It was shut down for repairs.
Also, a pipeline carrying propane to Minnesota was reversed and now carries ethane to the Gulf Coast, helping to further the shortage.
“This triggered a chain reaction causing suppliers to go further out to load their supply. Rail re-routing also impaired Canadian imports to the Northwest. This forced Minnesota and Wisconsin retailers to get their propane at the pipelines in Iowa, increasing demand in the state,” reported the NPGA.
Oil companies have also increased their exports of propane. In 2013, more than 20 percent of the U.S. propane was sent abroad, up 15 percent from 2008.
Como Oil has enough propane to keep its customers supplied. But, said Stariha, “We have been getting propane from Minnesota, Iowa, Wisconsin, Nebraska, Kansas, and even Texas. The increased trucking distances have helped to increase customer costs,” he said.
“People may be assuming heating fuel companies are taking advantage of the severe cold and making more money when prices increase,” said Stariha. “The truth is, while the wholesale price of propane has increased 140 percent, our margins on propane have not increased and we are doing everything we can to ensure our customers receive the heating fuel they need at a fair price.”
Gunderson also said, “I hope customers realize this crisis isn’t our fault. All we are is a retailer, a middleman. We’re doing the best we can to take care of our customers and make sure they stay warm. Like them, we feel stuck.”
On Monday, January 27, Governor Mark Dayton declared a peacetime state of emergency to address the shortage.
With this order the governor set in motion the Minnesota Emergency Operations Plan, an effort to help local governments respond to the crisis.
The state also has an emergency assistance program set up to help low-income residents and those on fixed incomes to stay warm during winter months.
State Commerce Commissioner Mike Rothman stated, “The most important issue for all Minnesotans during the winter is maintaining a safe and warm place to stay, and I encourage families and individuals who need assistance in heating their home to apply for energy assistance. This extended cold snap and a sky-rocketing propane price can present Minnesotans with tough choices between putting food on the table or staying warm—and we are here to tell Minnesotans that crisis funds are available to help with heating needs.”
Who qualifies for assistance?
The average grant is $500 per household where income is less than 50 percent of the state’s median income—$43,642 for a family of four. Applicants may qualify on a first-come, first served basis while funds last. But last week the Commerce Department increased the MEAP from $500 to $1,000 for low-income applicants currently heating with propane and heating oil.
Because of the extreme cold the governor has also issued an executive order providing assistance for search-and-rescue and for sheltering stranded motorists, calling on the National Guard to lend assistance where needed.
“This has been a difficult winter for everyone,” said Will Norman, co-president of Como.
To save on propane, companies are suggesting that customers turn down their hot water heaters, turn down thermostats 10 to 15 degrees before leaving for work, and make sure furnace filters are clean.
Industry experts say the shortage may continue to April unless the Northland gets a warming spell, and none is predicted right now.
Meanwhile, Como says it has enough propane to take care of its customers, and they have dropped their minimum fill from 200 to 100 gallons.
As for propane’s future, “The long-term price for propane is very stable,” said Stariha. “Spikes in propane demand, like the one we are experiencing are usually temporary events and the long-term price trend for propane appears to be very reasonable for the foreseeable future,” he said.
Applications for the Minnesota Energy Assistance Program can be found online and additional information can also be found by calling toll-free 1-800-657-3710.
The Arrowhead Economic Opportunity Agency and Salvation Army may also be able to provide some assistance.
Governor Dayton has also instructed commissioner Rothman to protect Minnesotans from price gouging and anyone who believes they have been a victim of this can call tollfree 800-657-3602.
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