Trade Resources Industry Views Chat The Propane Spike in Marketing Talk

Chat The Propane Spike in Marketing Talk

This year's spike of U.S. liquified propane (LP) prices has been blamed on increased grain drying, harsh winter weather, low supplies and exports. But, the increased amounts of product being exported, while many U.S. LP users struggle to pay nearly double for the heating product, is being identified as a major concern.

The most recent Energy Information Agency (EIA) report indicates that propane stocks are 24.0 million barrels lower than a year ago, a drop of 43.8%.

As a result, LP prices jumped as high as $7 per gallon in the Midwest and $10.00 on the East Coast, at the height of the winter shortage.

Chat the propane spike in Marketing Talk.

Though prices have retreated to around $3.30 per gallon in Iowa, as of Friday, this week's Midwest and Northeast cold temperatures and snowstorms could push wholesale prices higher, as shippers may be forced to buy more spot priced supplies.

As LP customers deal with sticker shock this winter, industry representatives are being asked by lawmakers if its appropriate to be exporting a large supply of LP, as the nation gets squeezed on supply. 

In October, the U.S. LP exports reached 400,000 barrels per day, according to the Energy Information Agency (EIA). U.S. produces 1.4 million barrels per day, EIA data shows. 

While crude oil and natural gas have export restrictions, LP can be exported freely.

U.S. Senator Tim Johnson (D-SD) has joined a bipartisan group of 29 Senators in sending a letter to President Obama that calls for federal assistance to increase propane supply in areas that have been affected by propane shortages and significantly higher costs, according to a press release.

Separately, Rep. Bruce Braley, an Iowa Democrat, has asked the President to help curb exports of propane.

"We are facing a propane emergency within the U.S. that can be partially attributed to an increase in exports," Braley stated in his letter.

EXPORTS RISE

Meanwhile, industry experts are concerned at the amount of propane leaving the shores of the U.S.

"The LP industry needs to find solutions to current supply challenges out there,"  says George Jacques, Iowa Propane Association board member.

The majority of the exports can be tracked to a Houston, Texas Ship Channel. In January, the US-based midstream companies Enterprise Products Partners LP (Enterprise) and Oiltanking Partners partners LP (Oiltanking) entered into a 50 year agreement to support a third-phased expansion of the existing LP terminal sited along the Houston Ship Channel.

With a current expansion underway to handle an export capacity of 9.0 million barrels/month, the new agreement will expand the Houston Ship Channel's ability to export 16.0 million barrels of U.S. LP/month.

Source: http://www.agriculture.com/news/crops/prope-flows-out-of-us_2-ar41938
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Propane Flows out of U. S.
Topics: Metallurgy