Propane prices crunch family heating budgets

Wednesday, January 29, 2014

The local price of propane has skyrocketed from $1.99 to $4.99 per gallon in less than a week, rising as much as a dollar overnight, leaving rural residents struggling to afford to heat their homes, and farm operations worried whether there will fuel available to fulfill their contracts.

"When it gets to $4 a gallon, you can tell what it's going to do to people," says Joan Spooner, of Upper Des Moines Opportunity, the local charitable organization that handles energy relief.

"Obviously this is going to blow people's budget for winter, and a lot of them have already been close to the line as far as making it or not. We have the potential for a lot of winter weather still ahead of us."

She fears the only solution for a lot of people to stay warm will be turning to cheap electric space heaters. "I'm sure they have been improved, but there is still a danger for more fires there. It's just not a real safe situation."

Unlike buying propane, electricity is subject to winter moratorium -- the power company can't shut them off in the middle of winter. "However, when we get to April 1 and they have piled up huge electric bills from constantly running heaters, they are going to be up for disconnect, and how are they ever going to catch up on those bills?"

At the beginning of the week, her UDMO office had access to a Crisis Fund for energy emergency cases. The whole season's allotment has about been exhausted within a few days.

She fumes a bit, wondering how such a crisis happened without notice.

One local resident calls into the office. "My propane tank is empty, and I'm all out of fuel assistance. Is there anything you can do?"

The answer, unfortunately, is not much.

"Propane doubles overnight -- that's a huge impact. It's a no-win situation," Spooner says.

Storm Lake-area farmer Paul Merten says that he was fortunate to still have some fuel in his tank when the prices rose, and can only hope for relief in the prices before he is forced to buy in February.

Some of his neighbors operate livestock operations that depend on large amounts of propane to heat confinement buildings, he said, worrying about the impact on that industry. "I assume they are buying on contract so the price increase might not have hurt them yet, but if there is an actual shortage, it could be bad. It doesn't help to contract if you can't get the fuel in your tank. And even kerosene is $5 a gallon now, so there aren't many options," Merten said.

"I was at Larson Oil this morning, and they said that on Monday it was $1.99, and today [Friday] it was $4.99. It sounded like they would maybe try to send a truck to Texas hoping to find some less expensive fuel."

Merten, who is also a Buena Vista County Supervisor, says that if the fuel prices remain high, there will be a heavy impact on the rural area.

"If a person has a 500-gallon tank and it gets them through a month or two for their home, and they have to call in a 200 gallon order today -- that's a thousand bucks to get through the next month. That hurts," Merten said.

He too wonders how such a situation could have developed overnight.

"There are storage facilities all around the Midwest, and you would think they would have some sort of stockpile. Most of us who are farming book in our propane for dryers in spring or early summer. The amount of drying this year was a little more than the last two, but we really haven't had a year for a while that required a large amount of dryer use, so demand shouldn't be out of the ordinary. All I can think is that there is something going on in some other area of the country that suddenly created a big drain."

The spike caught users all over the area by surprise, as the fuel had been one of the most stable in price in the region.

"It's never really been an issue. It's always in that $1.50 range. I think it went up as high as $1.80 a couple of years ago, and earlier this year it was $1.20 to $1.30, but generally there is not a large fluctuation," Merten said.

What will fix the issue? Perhaps not government, he allows.

"Warmer weather would help," he says.

Several states have declared fuel emergencies in light of the sudden situation.

The director of the Iowa Propane Gas Association describes it as "a perfect storm" of events leading to the crisis. A late fall harvest forced farmers to dry-down corn more than had been expected, increasing demand for the fuel. Winter hit early and has brought several stretches of bitter cold that increased home usage, and increased exports to Asia were already locked in, according to IPGA Director Deb Grooms.

Making matter worse, a major pipeline was shutdown in November. The 1,900-mile Cochin pipeline had carried liquid propane from Canada into northern Iowa, Minnesota, Illinois, and the Dakotas. Owners Kinder Morgan Energy Partners reportedly planned to reverse the flow of the pipeline so it can ship petroleum product light condensate from Illinois to Alberta. The product is used to dilute thick oil drawn from the oil sands in Canada, and sells at a strong profit.

With the pipeline lost, trucks from the other states have hit northern Iowa propane terminals hard. It is hoped that rail lines can eventually be used to offset the problem and begin to rebuild supplies. Farmers and retailers are expected to need to expand storage capacity.

Iowa Gov. Terry Branstad and Lt. Gov. Kim Reynolds applauded Texas officials this week for waiving Texas licensing, permitting and certification requirements for liquefied petroleum gas trucks and operators. The action will help get more propane to Iowa for the remainder of the frigid winter months.

"After asking Texas officials yesterday for the waiver, I was pleased to learn of their quick action to assist Iowans and Midwest states with the shortage of propane," said Branstad.

"Governor Perry and Lieutenant Governor Dewhurst's willingness to help Iowans is tremendous and the impact is very helpful," said Reynolds. "This action will help propane suppliers keep up with the demand."

In addition, the U.S. Department of Transportation established a regional emergency declaration suspending the regulatory provisions pertaining to hours of service for drivers of commercial motor vehicles transporting propane.

The price spike is taking a toll of suppliers as well.

Lakes Lube Center sells propane from its location near Highway 9 in Spirit Lake. Technician Brian Reinhart has seen a drastic shift in sales within the span of 24 hours.

"Actually, yesterday, I did a lot of propane," Reinhart said on Friday. "Today, nothing -- because of the fact that propane has gone up so high for a 20-pound [4.7 gallons] propane tank. Yesterday, it was $18.95. Today, it's $35.95."

"People are not happy, that's for sure, but people need it," Reinhart said. "I think they're procrastinating on coming up here to get it -- and I would too, honestly. This is absolutely ridiculous. We're not even making anything off selling this propane because it's not fair."

He said that suppliers have no choice but to see at the current rate, and said that even at that price, "We're not making anything off it."

Area state legislator David Johnson heard concerns from residents the moment he returned from Des Moines.

"Getting back to the district today, I heard a lot about it -- at the post office, at the fuel pump, on main street -- and people are really concerned," Johnson said Friday. "These are incredibly high prices. They really caught people off guard. Market is a very difficult thing to predict and who would have thought? We certainly can't do anything about the weather. We can talk about it all we want, but who would have expected this kind of weather pattern to repeat itself over and over. And, we're going back into the deep freeze."

"I would not be surprised to see [pump] fuel prices start inching up, too," Johnson said. "The heating assistance program is one place where government can help with additional emergency funding, but most of that comes at the federal level. The state has rarely contributed to that, but that can't be ruled out."

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