A national propane shortage caused costs to spike this winter across the nation, leaving local customers reeling with sticker shock.
A steep increase from $2.75 a gallon in January to $3.50 in February took Barbara Rousseau, a Suburban Propane customer and Mancos resident, by surprise. She said steep price jumps make it impossible to plan for bills. Rousseau is one of about 3,500 Suburban Propane customers in the area, according to Norm Steveson, the manager of the company, formerly known as Navajo Butane.
“Where is the regulation? Where is the government oversight?” Rousseau said.
Rousseau has been a Navajo Butane customer since 1991, and she has appreciated the manager’s communication about the shortage. But she is frustrated with the price spike that was outside normal winter increases.
In February 2013, a gallon of propane was $2.27 to $2.37 per gallon, Steveson said.
At Fraley & Co., another local propane dealer, the highest price during the shortage was $2.80 a gallon, but the owner worked hard to keep his customers insulated.
The price spike, while hard to swallow locally, hit harder east of the Rockies. On Colorado’s eastern plains, prices reached $5 a gallon, said Jennie Miller, the energy-assistance program director of Energy Outreach Colorado.
With the high propane prices, the need for assistance is rising, she said.
Energy Outreach Colorado provides funds to the Piñon Project and similar local agencies across the state to pay utility bills for those in need.
She said that since October, the agency had paid almost $300,000 to heat the homes of 614 families in Colorado. She saw a 39 percent increase of the number of families in need compared with last winter.
The state-run Low Income Energy Assistance Program – or LEAP – helped 826 people in Montezuma County and 84 people in Dolores County, supplying an average benefit of $584 in both areas.
The cost of propane motivated LEAP to increase the maximum benefit for a customer to $1,300. Those who already received the maximum benefit of $800 could receive the additional $500.
“With the recent increases in home heating costs, especially propane, we want to make sure that no Coloradans go cold because they can’t afford their heating bill,” LEAP manager Aggie Berens said in a statement.
Montezuma County was insulated in part by local propane production in Durango but didn’t escape nationwide circumstances, said David Fraley, owner of Fraley & Co.
A perfect storm of high demand and high exports hit the United States this winter, causing an unpredicted shortage, said Baron Glassgow a representative of the National Propane Gas Association. It created an environment that no one had seen before, he said.
It had a high impact on consumers because there are also no state or federal regulations governing the price of propane for residential tanks, Fraley said.
Before winter set in, more than 20 percent of domestic propane was exported in 2013. Rains late in the growing season caused farmers in the Midwest to use massive amounts of propane to dry their crops. In addition, major pipelines in the Midwest were shut down for repair, limiting supplies, he said. Winter rolled in, bringing harsh weather, particularly on the East Coast and Midwest, and with it a high demand nationwide.
All these factors prevented regional inventories from recovering, and truckers have had to go farther and spend hours waiting in line to fill up, he said.
For local propane dealers, a shortage leads to a double whammy. Deliveries from suppliers are going to be much more expensive, while more customers will be unable to pay their propane bills, he said.
“Cash flow becomes a real issue,” Glassgow said.
Some dealers will cut into their own profit margins to help meet the needs of their customers. But to make up for losses in the winter, they may charge a little bit more in the spring, and prices may stay higher for longer.
Local propane dealer Fraley said the road to the recent shortage unfolded over the past eight to nine years. It was driven, in part, by increased drilling across the nation. This drove the price of U.S. propane down compared with the global market, and encouraged companies to invest in infrastructure to export, he said. Propane exportation ramped up in 2013.
There had been such a large inventory of propane for so many years that no one was concerned about the exports. The supply chain was not ready for wet crops, pipeline maintenance and a harsh winter.
“The industry as a whole kind of fell asleep at the switch,” he said.
Although Cortex is only 60 miles from a propane production site near Durango, demand at a major propane hub in Kansas still forced local wholesale prices up, he said.
Fraley worked to conserve his inventory as much as possible during February and managed to not buy propane during the crisis, which kept his prices lower.
Propane prices across the nation have begun to fall from the mid-February peak, and the industry is talking about avoiding a shortage.
A task force from the National Propane Gas Association plans to consider ways to improve regional storage, truck and rail operations and how the shale gas infrastructure is affecting the propane industry, Glassgow said.
There is no way to know what next season’s prices might be like, but Glassgow said he is hopeful that the association will avert another shortage.
To contact LEAP for help with housing assistance, call 1-866-HEAT-HELP.
mshinn@cortezjournal.com