Bloomberg News

Propane in Midwest Jumps to Record as Senator Calls for Review

January 24, 2014

Propane in the U.S. Midwest jumped to another record as a U.S. senator asked for a federal review of the market to ensure supply shortages aren’t being created artificially.

Propane at the Mid America Pipeline Co. terminal in Conway, Kansas, ranged from $4.12 to $4.71 a gallon today, according to price compiled by DTN Energy. Prices on the spot market in Conway rose $1.71 to $4.95 a gallon yesterday, according to data compiled by Bloomberg.

U.S. Senator Chuck Grassley of Iowa asked Federal Trade Commission Chairwoman Edith Ramirez in a letter to review the propane market in the Midwest after prices rose 252 percent since Jan. 14.

“I request that the Federal Trade Commission remain vigilant in overseeing the propane market to prevent possible anti-competitive behavior or illegal manipulation, and to ensure that any supply shortages are not created artificially,” Grassley wrote.

Propane suppliers are telling Minnesota turkey farmers, who use the fuel to heat their barns, that there there’s only enough fuel left to last five days, Steve Olson, director of the Minnesota Turkey Growers, said today. Suppliers are giving out partial loads to stretch out the inventory.

“Some of the suppliers are requiring guys to pay up front, and with the increase in price, it’s causing a huge economic impact on them,” Olson said. “The bigger concern, is what’s going to happen when supplies run out? Because we’ve got to heat the birds, we’ve got to heat the barns.”

Falling Supplies

Supplies of propane and propylene in the Midwest fell by 1.34 million barrels to 10.2 million last week, the Energy Information Administration said yesterday. That’s the lowest level for mid-January since the EIA began keeping data in 1993. Propane supplies throughout the U.S. fell 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.

Supply issues in the Midwest date back to 2011 and 2012, when increased production from shale formations inundated Conway and sent prices to an average discount of 10.4 cents a gallon and 18.9 cents a gallon below prices in Mont Belvieu, Texas.

Yesterday, the spot price in Conway was $3.425 more than at Mont Belvieu the largest premium since at least 2001. Last year, propane at Conway sold at an average discount of 2.8 cents to Mont Belvieu. They are the top two U.S. propane storage hubs.

Companies built pipelines such as the DCP Midstream Partners LP-operated 175,000-barrel-a-day Southern Hills system to allow producers to ship propane and other natural gas liquids to the Gulf Coast. Enterprise Products Partners LP (EPD:US) and Targa Resources Partners LP (NGLS:US) were among companies that last year opened docks on the Gulf Coast for NGL exports.

Midwest supplies were further depleted by higher demand for drying crops last fall, followed by severe winter weather in December and January. The Midwest accounts for 36 percent of propane used for home heating, followed by the South at 34 percent, EIA data show.

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Eliot Caroom in New York at ecaroom@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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Companies Mentioned

  • EPD
    (Enterprise Products Partners LP)
    • $37.47 USD
    • -0.54
    • -1.44%
  • NGLS
    (Targa Resources Partners LP)
    • $63.52 USD
    • 1.49
    • 2.35%
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