Posted on 01/23/2014 9:57:57 AM PST by topher
(Reuters) - U.S. Midwestern states are scrambling to address a deepening shortage of the home-heating fuel propane just as another cold snap envelops the region, threatening to strain supplies that are already at historic lows.
Demand has been boosted by the combination of record freezing weather at the start of this year and a late, wet, record corn harvest last October and November, when large quantities of propane were used to dry out crops. Propane stocks have been drained and prices in the region are the highest since at least 1990.
(Excerpt) Read more at reuters.com ...
Just send the propane North in trucks/rail/barges.
I also found that Michigan's governor has also declared a state of emergency over this.
There is significant storage. But the amount drawn out this late fall was above normal.
Methane does not refine into propane.
I have a 1,000 gallon propane tank (which I own) buried in my back yard (in PA). I have about 300 gallons left. I can get a delivery of 500+ gallons for $2.199 per gallon (last season it was $1.799). I’ve gotten it as low was $1.199 a few years ago. Then again, we were told energy prices would necessarily skyrocket, weren’t we? I was going to wait for the price to come down a bit, but I guess that’s not happening!
I suspect too many people went into winter without enough fuel hoping the price would go down.
That might happen during a mild winter, but this winter has harsh. Then when they get too low to wait any longer, too many people are trying to refill at the same time. Price spikes.
We are still meeting demand. Demand will also lower with higher prices; folks will turn down their thermostat.
EIA article on this...
This article explains some of the why of this...
According to the article, supplies of propane have been moving South (Mount Belvieu in the Houston, TX area) because they receive a higher price than at the other hub (Conway -- Central Kansas).
EIA article explains in detail...
That has a lot of good info.
With the onset of severely cold weather seen over the past weeks, propane supplies in the Midwest are extremely tight. The Midwest spot price of propane at Conway, Kansas, has spiked far above the Gulf Coast spot price at Mont Belvieu, Texas. The high propane prices in the Midwest are the result of both increased demand for crop drying in November and increased demand for space heating in the current cold weather.
In the Midwest, propane is used for both drying agricultural crops and heating homes and businesses. For corn to be stored, it first needs to be dried, using large-scale heaters that often use propane for fuel. A late-2013 corn harvest, along with cold, wet weather, resulted in strong demand for propane at distribution terminals in the Upper Midwest. For the week ending November 1, 2013, Midwest propane inventories dropped more than 2 million barrels, the largest single-week stock draw in any November since 1993. This demand prompted a strong upward price response, and propane at Conway moved to a 3-cent-per-gallon (gal) premium over Mont Belvieu during the first week of November, the first such premium in almost three years.
After the harvest, logistical problems prevented the region from fully replenishing inventories before the onset of winter. The Upper Midwest is supplied with propane by pipelines (Mid-American and ONEOK) flowing north from Conway (home to 30% of the nation’s propane storage), the Cochin Pipeline coming south from Canada, and from rail deliveries. The Cochin Pipeline, which delivers ethane and propane from Canada to the Upper Midwest, was out of service for maintenance from late November to December 20 and unavailable to deliver supplies. Rail transportation disruptions, both due to weather and other factors, curtailed deliveries from Mont Belvieu and Conway, as well as from Canada.
The most recent cold weather increased space-heating demand at a time when markets were already tight. As demand outpaced supply, inventories dropped further, by 1.5 million barrels and 1.2 million barrels for the weeks ending December 6 and January 3, respectively. Since the week ending October 11, Midwest propane inventory levels have dropped by 12.8 million barrels, compared with a drop of 7.3 million barrels for the previous five-year average for that period. By January 21, prices at Conway had vaulted to a 95-cent/gal premium to Mont Belvieu.
Strong demand surges, low inventories, and supply challenges have led several Midwest states to implement emergency measures to provide propane to heating customers, including suspensions of limitations on hours of service for propane-delivery truck drivers.
From early 2010 until November 2013, propane prices at Mont Belvieu, the nation’s largest propane storage and market hub, have been higher than at Conway by as much as 30 cents/gal, prompting propane supplies to flow south on newly expanded southbound pipelines. High demand from the local petrochemicals industry and access to the global propane market via expanded HGL export capacity supported higher Mont Belvieu prices and encouraged propane from the Rockies (PADD 4) and elsewhere in the Midwest to flow south.
Midwest propane markets tighten further on cold weather
Apparently, two factors are a pipeline down for maintenance (Cochin Pipeline) and rail disruptions.
Been here for 60 years, never heard of anyone baking their spark plugs before.
...sure, simple supply and demand. I did go into the season with a full tank. I have other means of keeping warm as well. 300 gallons will get me through the season if I need. I’m just not sure if I should wait until April or fill it now.
I added the reserves in the two states and Texas has a total capacity of 414 million barrels and Louisiana has a total capacity of 303 million barrels. The Winnie location in Texas is scheduled to be expanded.
Topher, you said, “The vast majority of the propane supply comes from natural gas liquids, along with ethane, butane, etc”
Texas has more natural gas than any other state and much more is being stored due to our several fracking dilling locations right now. Propane is another Texas export to the states.
In the early days of drilling in Texas for oil, no one had any use for the natural gas that also came out of those wells, so it was burned by torch 24 hrs. a day. I lived in the middle of the east Texas oil field growing up and could see those gas torches burning all the time.
The middle of the town of Kilgore, Texas, a short distance from us in east Texas, was a mass of torches all around the town. And, I mean also in the downtown area - it was a glut of oil derricks in that town. In those days, there was an oil derrick at every well. At Christmas, Kilgore would put Christmas lights on all those derricks, one after another, and we would go there to see the lights.
I grew up climbing up oil derricks as they were all around us. My father worked for Sun Oil Company there all his life. He was in charge of deciding where to bury oil pipelines leading from the wells and drawing the diagrams the men digging would follow. My parents came from Arkansas and school only went to the 8th grade, but he was smart and could figure out where those pipelines needed to go underground to meet up with other pipelines.
My mother was very smart but again could only go through the 8th grade. She was scheduled to be a school teacher there but married my father instead.
Unusual (admittedly), but it worked. No one else could start their cars. After that, electrical outlets were installed where the cars parked (apartment complex in Kasson, Minnesota).
Might be something to remember if someone is having trouble.
This was on a V8 engine on an older car, and it took a few minutes to remove and re-insert.
I only did 4 of the 8 spark plugs...
Our gas comes from MFA Propane (Missouri Farmers Association) a cooperative.
One of those states is Louisiana, which has refineries and access the Mississippi River for sending barges North.
I imagine the propane shortage will get attention by the private sector, but the severe weather may affect getting the propane North by barge/rail/truck...
Maybe having a wood burning stove would be an alternative, but the initial cost might be a SEVERE hinderance...
A site would have to be found, and a very large propane tank to dispense from.
Then fill it summer, and have a CO-OP truck make deliveries in winter.
Shares could be sold in the CO-OP to defray investment costs.
The biggest problem might be EPA regulations...
Salt domes, not old salt mines. Salt was removed but it was to make the space, not to recover salt. I have been in one of the storage facilities.
In 2005, Congress directed the SPR to take actions to fill to its authorized size of one billion barrels. Because the Reserve currently has a physical capacity of 727 million barrels, the SPR prepared a plan to expand to one billion barrels and conducted a site selection process to construct additional storage facilities. An environmental impact statement was also prepared. However, efforts to expand the SPR to one billion barrels were terminated in 2011.
http://energy.gov/fe/services/petroleum-reserves/strategic-petroleum-reserve
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