Propane Exports Put Crunch on Domestic Users, Americans Scramble for Propane Amid High Prices and Bitter Cold

Propane Exports Put Crunch on Domestic Users Propane Shortages in U.S. yeah right!

I rarely have a TV on, was at the dinner table with my wife. She had CBS Evening News on,  A stopr about Propane Shortage caught my attention. Well started researching the topic. What a shock…. this is some of what has me wondering. Propane prices went from about $1.80 per gallon last year to almost $5.00 per gallon this year and massive shortages here in the U.S. Yet exports far exceed domestic use. This seems to be a man made shortage. Much like the Gas shortages in the U.S. in mid seventy’s. I was living in Europe then and there was NO SHORTAGE. In tghe CBS news cast there was a pig farmer, lasts years heating fuel was $2,000 per month where as this year is over $8,000 per month. He stated that his home heat settings were at 65 and his barn was set at 69. Cold pigs are skinny pigs. Herein the U.S. there is a shortage of Propane, however there is more being exported due to the higher prices, than is allotted for use in the U.S. Seems profit is more important than American need.

UPDATE 2-As U.S. states scramble for propane, exports remain high

exports By Julia Edwards and Robert Gibbons Jan 30 (Reuters) – U.S Northern and Midwestern states called on Thursday for new ways to ease a supply crunch of the heating fuel propane during the second week of a bitter freeze, in a sign the shortages are expected to continue into next month. While millions suffer from the supply squeeze and sky-high prices, government data showed the fuel was being exported at historically high levels going into the winter, and analysts say the pace of sales abroad continued in November and January. On Thursday, states called for cash to be released to hard-hit consumers, waivers on road restrictions to be extended and warned propane suppliers from taking advantage of the situation by price gouging. Trucks have rushed to the propane storage facility in Mont Belvieu, Texas, only to find a two-day wait to stock up, suppliers and traders said. Nevertheless, Texas stock has been plugging the gaps in supply as far north as Minnesota. Six governors from Upper Midwestern states spoke on the telephone to their Texan counterpart, Rick Perry, and asked him to extend a waiver on trucking restrictions, which runs out next Wednesday. “I told Governor Perry how important his previous wavier had been to Minnesotans, who are suffering severely from this propane crisis. He very graciously agreed to extend the waiver when it expires next week,” Minnesota Governor Mark Dayton said in a statement issued after the telephone call. Governors from Wisconsin, Iowa, North Dakota, Indiana and Ohio took part in the call, the governor’s office said. Benchmark propane prices for fuel heading towards the Midwest more than doubled since the start of the year to just shy of $5 a gallon last week. On Thursday, they swapped hands for as much as $3.50, but then slipped to $2.45, traders said. Residents of states such as Wisconsin, Minnesota and Iowa paid more than $4.50 a gallon on Monday compared with $1.90-$2.30, according to Energy Information Administration data. Such price spikes caused Democrats in Oklahoma on Thursday to call for state funding for consumers. “Rural Oklahomans rely on propane to warm their homes and support their livelihoods,” Oklahoma Democrat James Lockhart, said. “This is about survival for them. We have been diligent in putting away state funds for emergencies, and I can assure you that our low-income citizens and the elderly believe this propane shortage is an emergency.” Wisconsin Governor Scott Walker released $8.5 million for households and ordered another $8 million in loan guarantees for propane suppliers having difficulties sourcing the fuel. Michigan said it wants an extension of a waiver allowing truckers to drive longer until Feb. 11, another sign that the shortage there at least, could last for another week or so.   RECORD PRE-WINTER EXPORTS Energy Secretary Ernest Moniz described the shortages as the result of a “perfect storm” – unusually high demand to dry out corn crops came after a later-than-normal harvest with no break to stock up before the onset of the freezing winter. He said the Department of Energy has some authority to prioritize how propane is shipped and it is also in touch with other state departments to find ways to ease the shortage. But propane organizations and suppliers say record-high exports contributed towards the crisis because they depleted inventories just ahead of winter. Stocks in the Midwest are at record lows for this time of the year, EIA data shows. Data from the Energy Information Administration issued on Thursday showed that, coming into the winter, propane exports rose to 410,000 barrels per day (bpd) in November, the highest since the agency began collecting data four decades ago. That figure eclipsed the 408,000 bpd exported the previous month, which in itself was a big jump from the 270,000 bpd that had been exported on average in the previous months of 2013. And some analysts said the high exports have been more or less maintained throughout December and January. Energy consultants RBN Energy, citing fellow consultants IHS Waterborne Energy, said exports barely dipped below the 400,000 bpd mark in the past two months and, according to their chart, have stayed above the 375,000 bpd mark. U.S. propane production has risen hand-in-hand with the shale oil and gas boom. That led to healthy domestic supplies and encouraged exports as prices at home fell relative to the rest of the world. February Saudi Arabian propane prices, a benchmark against which Middle Eastern sales to Asia are priced, were set at $970 a tonne, an industry source said, translating that to around $1.86 a gallon. That is higher than the $1.51 that a Mont Belvieu barrel would fetch in the same month.While Moniz did not refer to exports, other politicians have noted the high level of sales abroad and said the issue might impact their deliberations on whether to allow the export of U.S. crude oil, a critical energy policy issue for 2014. (Additional reporting by Ros Krasny in Washington; writing by Sabina Zawadzki; Editing by Steve Orlofsky, Meredith Mazzilli and Andre Grenon)

Source: reuters.com

Americans Scramble for Propane Amid High Prices and Bitter Cold

By JAN. 22, 2014 As a second arctic blast barreled through most of the Midwest and Northeast this week, Americans who use propane to heat their homes are scrambling to deal with sharply higher prices and a limited access to the fuel. Distribution problems have left swaths of the rural Midwest vulnerable to the cold, and governors in states from New Mexico to Maine have issued decrees to hasten propane delivery. In central Ohio, the Morrow County emergency management director, Joe Edwards, said supplies of the propane, which is used by at least one-third of families in the county, were “dangerously low.” Mr. Edwards said he was working with the Red Cross to make sure shelters were available, though he had not yet received calls from families who had run out. Distributors and analysts say the problem is twofold: a sharp increase in exports of the propane that has led to a spike in price, and substantially higher use of the fuel to dry grain that came in too wet to store that has made it hard to keep up with demand. Jeff Petrash, the general counsel for the National Propane Gas Association, said that while “there is plenty of supply of propane,” the difficulty was getting that supply where it needed to be. About seven million homes, mostly in rural areas that are not served by a gas pipeline, use propane for heat. Domestic production has increased to an estimated 17.8 billion gallons in 2013, from 15.2 billion gallons in 2008, Mr. Petrash said. But offsetting the increased production is a robust export market, he said. The country exported an estimated 4.3 billon gallons of propane last year, compared to 800 million gallons in 2008. Propane distributors like David Randall, the general manager for Apollo Propane, which serves thousands of customers in southwest Ohio, said the tighter supply has led to wholesale price increases, to $2.20 a gallon from $1.10 a gallon a year ago. Prices for his customers, he said, have risen to nearly $3 a gallon from $1.90 a year ago. While most customers are still able to heat their homes, Mr. Randall said, “Some will have trouble paying the bill.” Joseph Draeger, who has owned Draeger Propane in Antigo, Wis., for 20 years, said he was shocked by the price increases. “There are going to be a lot of frozen homes here shortly,” Mr. Draeger said. “It’s the single parent, it’s the older people that just don’t have that type of income.” In addition, much of the fall corn crop was harvested while wet, forcing farmers and elevators to burn propane to dry their crops, further squeezing supplies. In response to the squeeze, federal and state regulators, hoping to quicken deliveries, have waived rules that govern how long delivery drivers can be on the road. But many distributors said those efforts were insufficient and that they were filling customers’ tanks halfway and sending drivers to terminals in faraway states to wait in lines for as long as 10 to 15 hours. “Ultimately, we’ll have to make more trips, and the gas is costing folks a lot more than they used to pay,” Mr. Randall said. Mr. Draeger was critical of the increase in American propane exports. “That blows my mind that we have no product here and these homes are about to freeze up and they are allowing exports,” he said. One solution in the Northeast is the import of propane to supplement domestic supplies. Joseph Rose, the president of the Propane Gas Association of New England, said New England distributors were getting shipments from Europe and Africa and blending that with domestic supplies in an effort to keep prices from rising too sharply. Some consumers may have been able to mitigate these costs by buying propane in advance or signing up for a fixed price rate earlier in the year, others are being hit hard by the increases, said John Foster, the president of Blue Flame Propane in Richmond, Michigan. “There’s kind of the haves and have-nots in this propane business.” “There’s people out there who are buying at $1.79 and have no idea that’s an issue,” Mr. Foster said. “They may get a little sticker shock when their gallons run out.”
Matthew L. Wald and Jess Bidgood contributed reporting.

Source: nytimes.com

Propane boom pits U.S. exports against home heat

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By Bloomberg News

HOUSTON — Midwest propane prices are higher than those on the Gulf Coast for the first time in three years as domestic demand competes with exports for supply. The benchmark price in Kansas averaged 1.4 cents a gallon more than the Texas equivalent this month, the first premium since November 2010. Midwest stockpiles are the lowest for this time of year since 1996, curbing supply in a region that uses more of the fuel to heat homes than anywhere else in the U.S. The country is shipping record levels of propane and propylene abroad, helping improve margins for producers while raising costs for farmers to dry their crops in an area that produces 32 percent of the world’s corn. Prices jumped 51 percent in the past year, illustrating a side effect of exports as shale drilling boosted production of natural gas liquids such as propane, as well as natural gas, to all-time highs. “The demand for exports is pulling barrels to the coast and away from traditional U.S. markets,” said Anne Keller, manager of natural gas liquids research at Wood Mackenzie, an energy consulting company in Houston. “Our own residential market is bidding against markets somewhere else in world for these barrels.” Propane in Conway, Kansas, was 3 cents a gallon higher than in Mont Belvieu, Texas, on Nov. 7, the most since Feb. 16, 2010, according to data compiled by Bloomberg. Conway and Mont Belvieu are the two largest storage hubs for the fuel in the U.S. Propane at Conway sold at an average discount of 18.9 cents to Mont Belvieu in 2012. The price fell 2.5 cents to $1.1925 a gallon on Nov. 15 in Conway, or 0.75 cent more than in Texas. Midwest prices have risen as new pipelines, including DCP Midstream Partners LP’s 175,000-barrels-a-day Southern Hills system, have allowed producers to ship more natural gas liquids, including propane and butane, from the middle of the U.S. to the Gulf Coast, where export docks and most of the country’s petrochemical plants are located. NGLs, which are pumped from wells along with natural gas and separated at fractionation plants, are used as feedstock in petrochemical plants, diluent for heavy crude in pipelines and gasoline blending. Oneok Inc. expects the expansion of its Sterling pipeline system that carries NGLs to the Gulf Coast from the Midcontinent to come online before the end of the year, Terry Spencer, the company’s president, said in a Nov. 6 conference call. Enterprise Products Partners LP and Targa Resources Partners LP were among companies that this year opened new docks on the Gulf Coast for NGL exports. The U.S. exported 294,000 barrels a day of propane and propylene in August, up 90 percent from the same month in 2012, according to the Energy Information Administration, the statistical arm of the Energy Department. Exports were a record 308,000 barrels a day in May. “In terms of exports, the EIA does not break out propylene from propane in its statistics,” said Peter Fasullo, principal at EnVantage Inc., a Houston-based energy consultant. “Virtually all of the exports are propane.” Increased shipments abroad helped reduce supplies and raise prices. The profit margin for fractionating propane in Mont Belvieu rose to 87.2 cents a barrel Nov. 15, from 57.8 cents a year earlier, according to data compiled by Bloomberg. Propane production has increased 51 percent since February 2011, as drillers targeted so-called wet-gas shale plays, which are rich in NGLs, with directional drilling and hydraulic fracturing. Output was a record 1.49 million barrels a day the week ended Nov. 1, according to EIA data. Supplies in the U.S. reached a record 75.9 million barrels Oct. 5, 2012, and were at 60.8 million on Nov. 8. The supply drain has been exacerbated in states in the northern Midwest, where farmers use propane heaters to dry crops, by wet conditions and a record corn harvest. Supplies in the Midwest fell 802,000 barrels to 19.8 million in the week ended Nov. 8, down 12 percent from a year earlier and the lowest level for early November since 1996, according to EIA data. Governors of Indiana, Iowa, Minnesota, Montana, Nebraska, South Dakota and Wisconsin declared states of emergency in late October and early November to allow propane tanker drivers to work longer hours to make extra deliveries. “Crop drying is pulling that differential higher right now,” Kelly Van Hull, manager of energy analytics at RBN Energy LLC in Denver, said by phone Nov. 11. “Once we get into the middle of December, all of that demand should be done and we should see a more typical differential.” Midwest states will produce 312 million metric tons of corn this year, nearly a third of the global crop of 963 million, according to data from the U.S. Agriculture Department. About 10 percent of homes in the Midwest use propane for heating in 2012, according to data from the U.S. Census Bureau. The Southeast follows with 6.9 percent, and the Pacific Coast is the lowest at 2.8 percent. Conway prices may strengthen further over the winter, as companies boost shipments of raw NGL feeds, also called y-grade, to the Gulf Coast from the Midwest, Dan Lippe, managing partner at Petral Consulting Co. in Houston, said by phone Nov. 8. Y-grade NGLs are fed into fractionators to separate the different components, such as ethane, propane, butane and natural gasoline. Companies want to fractionate on the Gulf Coast where there is more petrochemical demand for ethane, which makes up the largest portion of the NGL barrel, Lippe said. “We hardly need any ethane in Conway,” Lippe said. “No matter how cold it is, that volume of propane contained within the raw mix moves to Mont Belvieu. The premiums have the potential to get stronger over the course of the winter.” In the long term, U.S. prices will stay low enough to encourage more exports, Van Hull said, with supply going beyond South America to China and elsewhere in Asia. “By 2018, you’re probably looking at about 500,000 barrels a day of propane being exported,” Van Hull said. Enterprise is expanding its NGL export capacity and has signed multiyear supply agreements with overseas buyers such as TonenGeneral Sekiyu KK, a Tokyo-based refining and petrochemical company. Foreign demand means U.S. homes that heat with propane won’t see a repeat of last winter, when prices in the Midwest fell by 21 percent from the prior year. The EIA is forecasting that Midwest families who heat homes with propane will spend an average of $136 more this winter. “If demand is really strong in markets outside the U.S., we could end up with pull between our obligations to supply export markets and U.S. demand, and really that falls on the backs of U.S. residential and commercial buyers,” Keller said.

Source: dailyherald.com

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