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Rising Propane Prices, Shortages Add to Winter Woes

Posted By Ann Jackson On January 30, 2014 @ 2:13 pm In Thinking Policy | Comments Disabled

Persistent record-setting low temperatures across much of the United States are making this a tough winter for many families. Households face higher heating bills as prices for heating fuels continue to increase with rising demand sparked by the cold.

Price increases for liquid propane have been significant. The Department of Energy estimates that 6 million households, mostly in the Midwest and Northeast, use propane as their primary source of heating fuel. Low inventories and high demand for the fuel have caused shortages and higher prices, leaving many households struggling to adequately heat their homes. AARP’s analysis of energy data shows that age 65-plus households heating with propane can expect to face a significant increase in heating costs as the winter progresses.

Propane heating costs for age 65

Join the discussion: How are you coping with rising propane prices and dangerous shortages?

Not only is it costing more to heat with propane, but supplies are also extremely limited, particularly in the Midwest. The fuel is used for a variety of farm functions as well as for household heat. For example, propane fuels blowers used to dry corn destined for storage. An unusually large, late and wet corn harvest in the Upper Midwest resulted in strong demand for propane and a corresponding rise in prices.

The Energy Information Administration reports that since October, Midwest propane inventory levels have dropped by 12.8 million barrels, a 75 percent decrease compared to the previous five-year average for that period. In this tight market environment the extreme cold weather has increased demand for space-heating, exacerbating both price spikes and low inventories.

Some policy makers and consumers question whether the current shortage is also made worse by a too high rate of propane exports. Unlike exports of fuel oil and natural gas, restricted under U.S. energy policy, propane exports are unrestricted.

To facilitate delivery of propane, several Midwest states have declared emergencies to allow relaxation of restrictions on driving hours for propane-delivery drivers. Wholesale prices are also beginning to fall, signaling possible relief for households trying to stay warm during this bitterly cold winter.Ann McLarty Jackson

Ann McLarty Jackson works on consumer protection issues including low-income utility access and diverse access to financial products and services. She has written reports on federal and state utility assistance; winter heating and summer cooling costs for older populations; and access to financial institutions by diverse populations.

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