Cost of warmth sky-rocketing
Farming and your Freedom
Thursday, January 30, 2014 8:05 AM
This has been an up and down winter in the Midwest, with sub-zero temps followed by high 50s, then back into the deep freeze. But, there have been enough of the deep freeze days to cause a propane shortage, followed by sky-rocketing propane prices, tough to take if you're a farmer dependent for heat on the little blue flame.
Propane in the Midwest soared to another record premium over Gulf Coast prices, as supplies fell to the lowest level for this time of year, Jan. 24, said Bloomberg News. It was the lowest level of supply since at least 1994.
Hardest hit were livestock producers, particularly hog and turkey farmers, who heat their barns with propane. Midwest supplies fell by 1.34 million barrels, to 10.2 million, in mid-January, according to the Energy Information Administration.
Bloomberg reported that January may end as the coldest month for the contiguous 48 states so far in the 21st century. That's according to Matt Rogers, president of the Commodity Weather Group, LLC, Bethesda, Maryland. Interestingly enough, there was at least one day where temps fell to freezing or below in each of the 50 states, including Hawaii.
Bloomberg said propane supplies fell throughout the U.S. by 3.39 million barrels to 35.3 million, the lowest level since June 2011 and the lowest for this time of year since 2001. The cold snap has also hit those using natural gas, with prices rising sharply this past month, despite the vast supplies yet to be brought out of the ground by fracking.
In the U.S., propane supplies are hampered by shortages caused by dwindling deliveries to terminals. Bloomberg said DCP Midstream Partners LP has brought two propane tankers into Providence, R.I., since September and has three more booked for February - after bringing in just one ship in 2013 prior to September, the company said via an e-mail.
Pipeline deliveries are also short. Kinder Morgan Energy Partners LP's Cochin pipeline, that runs from the Midwest to Alberta, Canada, is operating at about 50,000 barrels a day, the firm told Bloomberg. This is because there isn't enough supply in Western Canada to fill the pipeline.
Meanwhile, Enterprise Products LP has shifted its next scheduled propane batch on the TE Products pipeline to an earlier position in the next pumping cycle, so they can deliver supplies to the Midwest and Northwest sooner, Bloomberg reported. That batch was scheduled to leave the Gulf Coast, Jan. 26.
Midwest propane supplies were depleted because during 2011 and 2012, pipelines shipped more gas to southern terminals because Midwest prices were depressed by an abundant supply.
"The propane went to where the prices dictated," T. Mason Hamilton, a Washington-based petroleum analyst, told Bloomberg.
Midwest supplies were further depleted, Bloomberg noted, by a heavy crop-drying season last fall. That was followed by severe winter conditions in December and so far in January. And, the Midwest accounts for 36 percent of all propane used for home heating.
There was just not enough time to reload wagons and get the supply out there before it was needed. "That's all she wrote," said Anne Keller, manager of natural gas liquids research at Wood Mackenzie, an energy-consulting firm in Houston, Tex.
I'll see ya!