Propane prices have spiked as domestic demand has increased and domestic supply has been decimated by lingering cold weather and significant infrastructure issues.
We are seeing limited media stories blaming this on ethanol. Here’s why that’s not the case.
First of all, the assertion is made that much more propane was used to dry corn after the late 2013 harvest. The problem is, there was a significant reduction in propane inventory before this even took place.
Propane/propylene inventory, millions of barrels
First Week of … 2012 2013 % Change
June 57.9 49.7 - 14%
July 63.2 57.4 - 9%
August 68.1 61.8 - 9%
September 72.7 64.5 - 11%
October 75.9 66.5 - 12%
November 73.6 62.1 - 16%
December 71.2 52.6 - 26%
January (2013-2014) 65.6 42.4 - 35%
February (2013-2014) 54.9 27.9 - 49%
The real cause of this problem is not the use of propane to dry a large corn crop late in the season, but numerous transportation issues, some causes by the cold weather itself. One of the biggest reasons cited is the fact that the Cochin Pipeline, which carries propane to the Midwest from Canada, was shut for maintenance from late November to late December. This pipeline provides 40 percent of Minnesota’s propane.
Worse news for propane consumers: This pipeline will be reversed to deliver light condensate to Canada from Illinois, as early as July 2014, which could cause a repeat propane issue next winter in the Northern Corn Belt. “That will be next year’s catastrophe,” a spokesman for the Propane Gas Association of New England told the news media.
In addition, U.S. exports of propane have seen a dramatic increase in the past year. According to the U.S. Energy Information Administration, exports of propane began in 2012 and by January 2013 were at 168,000 barrels per day. By October, exports had jumped to 408,000 barrels per day.
Information and updates from the U.S. Energy Information Administration: