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Wednesday, October 01, 2014
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Published: Tuesday, 1/21/2014 - Updated: 8 months ago

Toledo-area propane users feel heat

Weather and other factors lead to tighter supply, higher costs

BY JON CHAVEZ
BLADE BUSINESS WRITER

Excessive cold and a variety of unfavorable factors have left propane users in northwest Ohio and southeast Michigan facing a double dilemma of tight supplies and rising prices.

“It’s nationwide. The whole U.S. is feeling the pain. It’s not just here in Toledo,” said Justin McVicker, a sales and service representative with Reliance Propane and Fuel Oil Co., which serves the Toledo area and southeast Michigan.

“The U.S. is sending 11 million barrels of propane to Europe per month right now, and that’s not helping,” he added.

According to the U.S. Energy Information Administration, the supply of propane in the United States was at 38.6 million barrels as of Jan. 10. That’s down about 25.3 million barrels, or 39 percent, from the same time a year ago.

The federal Energy Information Administration says there are several reasons for the tight supply and high prices:

  • Farmers used an unusually large amount of propane this last fall to dry crops after an abundant grain harvest from an unusually wet season.
  • The heating season began early and has had stretches of extreme cold, leading to further depletion of the fuel.
  • Global propane prices are higher than in the United States, which has led producers to sell an increasing share of their product for export.

Ohio Gov. John Kasich and Michigan Gov. Rick Snyder have suspended restrictions on deliveries by tanker trucks that supply propane dealers. That allows the trucks to be on the road more hours and more days in a row.

The tight supply has left Mr. McVicker and others to prioritize their propane distribution to their main customers. When they do make a delivery, it usually won’t be 100 percent of what a customer wants.

At Beck Suppliers Inc., in Fremont, owner Doug Beck said he is coping with the shortage by not taking on new accounts and cutting maximum fills to 200 gallons per delivery to make sure all of his home-heating customers have propane.

He said everyone is running low. “There’s a shortage, and our main focus is take care of our main customers, and we’re not going to let anyone freeze. We’re asking customers to conserve,” Mr. McVicker said. “We’re fine right now. We’re just being real conservative. There’s no timetable for when this will improve.”

With supplies tight, prices have skyrocketed.

The average price for residential propane pushed up to $2.86 a gallon nationwide last week, a 59 percent increase from a year ago.

Lud Seaman, president of Lyons LP Gas Co., in Lyons, Ohio, in Fulton County, said, “It’s getting kind of hard to figure out what kind of price to have” because the price keeps swinging violently daily. These are the highest prices he has seen in 40 years of business.

On Tuesday afternoon, the wholesale price out of Mont Belvieu, Texas, a key propane terminal for pricing, rose 11 cents to $1.50 per gallon in just a few hours. Meanwhile, prices at the Conway, Kan., terminal rose nearly 63 cents to $2.15 per gallon.

Residential prices are much higher per gallon after tariffs, transport, and other costs are included.

“Currently, we have supply, but there’s no guarantee that’s going to continue during the winter, but we sure hope it will due to our relationship with our suppliers,” Mr. Seaman said.

Mr. Seaman said he has reserve supplies in Michigan’s thumb area. Most years he tapped those reserves. But, “We’re probably going to have to tap that all out this month,” he said.

“This year really turned out to be the perfect storm, the combination of low inventories, exports, and grain drying by farmers was huge,” Mr. Seaman said. “It all snowballed into putting us into this situation.”

Propane is the main heating fuel for 6 percent of Ohio households, according to the Census Bureau. Almost all of those houses are in rural areas, including a dozen counties in which propane’s share is at least 20 percent.

Most households in Ohio — 68 percent — heat with natural gas, followed by 21 percent that depend on electricity.

Blade news services contributed to this report.

Contact Jon Chavez at: jchavez@theblade.com or 419-724-6128.



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