Propane Prices Plummet Thanks To Large Inventories

MINOT, N.D. (AP) — Propane users may be heating their homes more cheaply this winter than they have for many years.

Large petroleum inventories have caused prices to plummet, and that’s good news for many rural residents who heat with propane.

“It’s kind of nice to see a smile on a face,” propane distributor David O’Keeffe said of the response he’s been getting when customers see their lower bills.

Barry Haggin, station manager at New Century Ag in Crosby, said prices dropped below 50 cents a gallon this summer before climbing back into the 50- to 60-cent range this fall.

“We are finding a lot of people have been filling up now,” he told the Minot Daily News ( ).

O’Keeffe, who operates O’Keeffe Oil in Mohall/Lansford, said the current low prices reflect an extreme that’s seldom seen, just as prices over $4 a gallon a couple of years ago were an unusual extreme. Buying extra tanks now to hoard a supply isn’t necessarily a good idea, though, especially given the cost and scarcity of tanks, he said. However, he sees some customers who might only fill half a tank at a time now able to afford a full tank.

Propane dealers are recommending that anyone who hasn’t yet filled their tanks for winter take advantage of the current pricing, which is expected to rise with demand once cold weather settles in.

Terry Bernhardt, Enerbase chief executive officer in Minot, said he’s seen propane as high as $4.25 a gallon during his 32-year career. As for lows, today’s prices are lower than any in recent history.

“It’s a very good, aggressive price right now. If people are looking at the propane market at all, they should really consider contracting some of their winter use, if that’s available to them,” Bernhardt said.

Nationally, average residential propane prices haven’t been less than $1 a gallon since 1999, according to the U.S. Energy Information Administration.

Propane prices have dropped about 40 percent from last year, said Scott Brockelmeyer, spokesman in Kansas City, Mo., for Ferrellgas, which has an operation in Minot.

“This is attributed to the fact that propane inventories are at more than a 20-year high,” he said, citing figures from the EIA.

Mike Sloan, an energy analyst with ICF International in Fairfax, Virginia, said a combination of high inventory, inadequate export capacity and lower than normal demand in corn country for crop drying are coming together to create the current low prices.

“We are seeing very rapid growth in production right now. There’s a little bit of a disconnect between the growth in production and the growth in demand. That’s leading to quite a bit of propane being put into inventory,” he said.

Sloan said much of the inventory in storage is waiting for new export facilities to open over the next 3-15 months.

“I do expect that prices will start to come up somewhat once the export capacity comes on line,” he said.

The glut of propane is opening markets in places like Central and South America because it’s forced prices down to a more favorable range for buyers.

“Prices here have come down to the point that when you take the price here, plus transportation, we can be competitive in a new market,” Sloan said. It’s opening in markets in places like Japan, India and Korea, and Sloan predicts China will be next.

“China will be a major market for us. The only question is how big. Part of it depends on what happens with the Chinese economy,” he said.

In coming years, worldwide demand for propane is expected to grow and put upward pressure on prices, he added. Third-world countries, as they develop, favor portable petroleum fuels to replace wood and other bio-fuels. Domestically, companies are developing facilities to convert propane into propylene, which is a raw material for a number of products.

“We will start to see prices coming up later this fall,” Sloan said. “By the end of this year, there will be open or two more export facilities on line, and that will start to erode some of the supply over-hang, and we will see a little bit of increase in price.”

However, he said, those increases won’t be to the extreme price levels shown a couple of years ago.

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Information from: Minot Daily News,