Propane projected to cost more this winter

Harsh weather could cause prices to spike

11/8/2011

Householders who rely on propane for heating should expect to pay a little more this winter for the liquefied fuel — and if winter is harsh, a lot more.

“Natural-gas prices have been fairly low compared to oil prices, and propane comes from both,” said Neil Gamson, an analyst for the Energy Information Administration, which is part of the U.S. Department of Energy.

Also helping keep prices from spiking is the weather has been mild now and government predictions are for a slightly milder winter than last year, he added. But if oil prices should spike or the winter weather hits hard early and often, then expect rising prices, Mr. Gamson warned.

In its October forecast, the Energy Department is predicting propane prices in the Midwest will rise about 4.8 percent over last year — that is with expected consumption to be down about 1 percent.

The government is forecasting that the average homeowner in the Midwest will spend $1,880 to heat their home with propane from October to March, compared to $1,817 in 2010-2011.

About 5 percent of total U.S. households heat with propane, according to the Energy Department. A new government propane forecast is to be released Tuesday.

Part of the uncertainty with this winter’s prices results from lower inventories, Mr. Gamson said. According to the energy department, propane inventories remain at the low end of their recent historical range and total about 60 million barrels — down about 4 percent compared to this time a year ago.

Jim McVicker, vice president of operations for Reliance Propane and Fuel Oil Co. in the Trilby area of Toledo, said that as a result of tighter inventories, prices per gallon are higher now than they were at this time last year. Propane costs about $2.15 a gallon now compared to $1.85 a gallon a year ago.

“Where they go from here all depends on what the weather’s going to do,” Mr. McVicker said.

If the winter is cold with lots of snow, customers probably will see prices rise 15 to 20 cents higher a gallon compared with last year, he said. “If we get a mild winter they’re going to try to get rid of the gas as quick as they can and everybody’s going to benefit.”

A key will be to watch what happens with gasoline prices, because propane tends to rise with gas prices, although it doesn’t fall as rapidly as gas prices, Mr. McVicker said.

One disturbing trend on prices is that normally after they have risen in the winter, they drop sharply in the summer. But that didn’t happen this year, he said.

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