U.S. Winter Propane Shortage Prompts Senate Hearing on Causes

Author: Kristy

MAY 2, 2014

grain bins propane

 Propane shortages last winter that left many U.S. homes and businesses without heat and sent prices to a record are prompting policy makers to consider how to prevent future scarcity.

U.S. inventories of propane and propylene tumbled for 19 consecutive weeks from October to February and slid to 25.7 million barrels in March, the lowest level since 2010, according to Energy Department data. In the Midwest, where more homes use propane for heat than anywhere else in the nation, stockpiles plunged to an 11-year low.

Widespread supply declines came as bitter cold boosted demand and as U.S. exports of propane increased, raising costs for those needing to keep spaces warm during the winter months. The benchmark price in Kansas jumped 25 percent in the past year to $1.06 a gallon yesterday and surged to a record $4.95 on Jan. 23. That was nearly five times the average of 98 cents for the time of year.

“As policy makers, we need more than just Econ 101 as we consider options for preventing such a crisis from recurring,” U.S. Senator Lisa Murkowski said yesterday at a Senate Energy and Natural Resources Committee hearing in Washington. “We need to have a deeper understanding of the factors that were at play.”

New pipelines have allowed producers to ship natural gas liquids, including propane and butane, from the central U.S. to the Gulf Coast. From there, materials can be sent overseas.

The U.S. exported 110.2 million barrels of propane and propylene in 2013, nearly double the volume of a year earlier, according to the Energy Information Admistration. Shipments abroad totaled 9.57 million barrels in February. The Midwest sent 1.8 million to the Gulf during the same time.

NGLs, which are pumped from wells along with natural gas and separated at fractionation plants, are used as feedstock in petrochemical plants, as diluent for heavy crude in pipelines and in gasoline blending.

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