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Published: Tuesday, 1/16/2001

Some propane users begin to feel price-spike heat

BY JANE SCHMUCKER
BLADE BUSINESS WRITER

Rural residents who didn't buy propane ahead during the summer are being burned even harder by high prices than those who heat with natural gas and didn't lock in prices early.

Propane prices are almost twice as high in Ohio and Michigan this month as they were the same weeks two years ago, according to the U.S. Department of Energy. Compared with those in early last January, prices are about 70 per cent higher.

“Chaos!” said David Hasbrouck, president of L.A. Bexten, Inc., which sells propane from its Ottawa Lake headquarters. “It's really getting ugly. I don't know how people are going to afford this stuff.”

Prices are the highest that Harold Miller, president of Reliance Propane Co. in Toledo, said he recalls from 50 years in the business. On Thursday, prices in the greater Toledo area ranged from about $1.50 to $1.71 a gallon, according to his survey. The next day many prices went up a dime.

Mr. Miller, who sold propane for almost $1.70 yesterday, said he thought prices have peaked for the year. Mr. Hasbrouck, whose price was $1.63 yesterday, was less optimistic.

“It's gonna flirt with the $2 a gallon range,” he said. “I pray it doesn't get that high, but it could come close.”

About 20 per cent of Mr. Miller's customers paid last summer for the propane they expected to use this heating season. Prices then were 90 cents a gallon, or about as much as the highest prices of the season two years ago.

Some companies, however, said many customers who bought ahead purchased about as much as they've used in recent winters - when weather was much milder - and will run out before the winter's over. Their final purchases of the season will be at much higher prices.

Unlike residents on natural gas lines who can make a contract to buy fuel at a certain rate and then pay for what they use each month, many people who heat with propane usually need to pay for their fuel months in advance to get the lowest price.

At AmeriGas Propane L.P. Ltd., which is based in Pennsylvania but has offices locally, about 40 per cent of customers in a five-state area bought their propane this summer at rates of $1 to $1.25 a gallon, marketing manager Lisa West said.

Across the region, its average price yesterday was $1.65 a gallon.

Propane's price spikes can be unusually high compared with those for other fuels because it is a byproduct of natural-gas processing and petroleum refining, and that means the amount available does not quickly adjust when prices and demand increase, according to the energy department. The price of propane is influenced mainly by the cost of crude oil.

Almost half of the nation's propane use is by the petrochemical industry, which uses it to make plastics and other materials when the price is right.

For homes and businesses that heat with propane, the fuel is usually the only choice without changing furnaces or boilers. Residential and commercial sectors account for almost 40 per cent of the nation's propane use. In the Midwest, most residential propane customers use it for heating; in the Northeast, more use it for cooking.

Most people who buy propane live in rural areas that have no lines for natural gas, which typically is cheaper.

By percentage, natural gas prices have gone up even more than propane prices for people who did not lock in rates. Even so, most natural gas customers are heating their homes for little more than half the cost to people who are paying current propane prices.

The price spikes have been good for some heating equipment suppliers.

Dick O'Donnell, a salesman at Bluflame Service Co. on Sylvania Avenue, said sales of high-efficiency furnaces are up 20 per cent this January over the same period last year.

“They're opening their bills up and `Oh my gosh, I've got to do something,'” he said of customers who suddenly are moved to replace older, less efficient furnaces and boilers.



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