Prepare for Propane Sticker Shock

Propane prices haven’t been so high heading into winter in a decade, which is bad news for the millions of rural Americans who rely on the fuel to stay warm. 

At $1.41 a gallon at the Mont Belvieu trading hub in Texas, on-the-spot prices are about triple those of the past two Octobers. Of the two main U.S. propane futures contracts, one hit a high earlier this month and the other doesn’t have far to climb to eclipse the record it set during the blizzard of 2014. The average residential price tracked by the U.S. Energy Information Administration has jumped by 50% from a year ago, to $2.69 a gallon.

All manner of heating fuels are heading into winter at their highest prices in years and could climb more if the weather is cold. But propane is expected to take the biggest bite out of household budgets.

Most U.S. households and businesses are heated with natural gas or electricity, highly regulated markets in which consumers are insulated from price swings in the commodities and usually given time to catch up on payments before they go cold. 

Buying propane is more like filling up a car. The fuel is paid for upon receipt and priced in the free market. Residential propane is delivered by truck, often by small firms over big swaths of countryside. Domestic inventories have been so drained by exports that it isn’t out of the question that some could be left for periods without propane no matter what they are able to pay.

“You have no alternative for heat,” said Robert Stier, lead petrochemicals analyst at S&P Global Platts. “Your options: Turn down the thermostat, put on a sweater or burn wood in a fireplace.” 

About 5% of American households are heated with propane. Outside of residential uses, propane fuels forklifts, heats hotel pools and is consumed in huge quantities to make polypropylene, a plastic. 

Retail energy companies compete with local utilities to give U.S. consumers more choice. But in nearly every state where they operate, retailers have charged more than regulated incumbents, meaning you may be paying more for your electricity than your neighbor. Here’s why. Photo Illustration: Jacob Reynolds

In 2013 the shale boom made the U.S. the world’s top exporter of propane, which is produced alongside natural gas and as a byproduct of oil refining. Exports have increased each year since, to about 1.3 million barrels a day. That is about triple the volume exported by the entire Middle East and Algeria, according to S&P Global Platts.

Overseas demand defied economic lockdowns. People stopped flying and driving, yet from India to Italy buyers of the bottled fuel kept cooking and heating their homes. Factories in China that turn propane into propylene—first stop on its way to becoming takeout containers—were too complex to shut down. Back home, patios and outdoor diners were warmed with propane like never before

In September 2020, U.S. inventories hit a record high. A little more than a year later, with production fairly flat, stockpiles have fallen 19% below what is typical this time of year. 

Normally traders spend summer socking away propane to sell in winter, when the futures market shows higher prices. Export markets this year kept prices for prompt deliveries higher than those in winter, said Mr. Stier, who is a former trader. “If the highest price is in July, why store it?” he said.

The last time prices were so high heading into heating season was 2011. That winter wound up being one of the warmest on record and prices fell before autumn ended. 

Even if this winter is 10% warmer than forecast, those who heat their homes with propane should expect a 29% bump, on average, the Energy Information Administration said this month. Under the agency’s expected scenario, buyers could pay 54% more than the past few years. That increase equates to an extra $1,600 in the South, about $1,800 in the Midwest and $2,000 in the Northeast. If it is 10% colder than forecast, bills could nearly double, the agency said.

Recently 36 U.S. senators asked the Biden administration to loosen the purse strings of a Health and Human Services Department program that helps the poor with their energy bills.   

Sen. Susan Collins of Maine is among the U.S. senators pressing the Biden administration to loosen a federal program that helps the poor pay for their energy bills.

Photo: elizabeth frantz/Reuters

“This funding will help ensure that low-income families and seniors do not have to make the impossible choice between paying for heat and paying for food or medicine,” said Sen. Susan Collins, a Republican from Maine, where more than 12% of homes are heated with propane. 

Suburban Propane Partners LP, which supplies about one million customers in 41 states, is offering budget payment plans and encouraging early fill-ups to avoid potential price spikes and availability issues, said Chief Executive Michael Stivala.

Customers haven’t rushed to buy yet, which might be because of broader inflation, Mr. Stivala said.

“Everything they’re buying is at an elevated level,” he said. “People might not have the ability to allocate more now for the heating season.” 


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