Arkansans who use propane to heat their homes are seeing a rise in the price of the fuel as frigid temperatures tighten supplies.
As a result of the supply disruptions, the U.S. Department of Transportation and governors in several states, including Arkansas, have issued orders allowing distributors more freedom of travel.
“[Prices] are going way up, rapidly,” said Jay Fricks, vice president of Fricks Butane Gas Co. in Texarkana.
He said wholesale propane prices reached more than $1.80 a gallon Wednesday, and deliveries from the company’s supplier in Texas have slowed.
Propane prices for January delivery at a distribution hub in Conway, Kan., have increased from about $1.60 a gallon last week to almost $5a gallon Thursday, said Mike McCafferty, an analyst with Platts.
The cost of propane at the Gulf Coast hub in Texas rose to more than $1.50 a gallon Thursday, up about 20 cents from a week ago, he said.
“We’ve seen wholesale prices rise 60 percent or more versus this time last year,” said Simon Bowman, spokesman for AmeriGas Partners LP, which has a location in North Little Rock. “We don’t like that, and our customers don’t like that. People are going to be a little more cautious with their usage.”
Propane is used to heat homes and water, dry clothes and crops and power generators.
Analysts and industry members say the supply problems are the result of a plentiful grain harvest last fall, an increase in propane exports and changes to infrastructure.
Last year’s wet grain crops “required massive amounts of propane in order to be dried prior to storage,” the National Propane Gas Association said in a statement on its website.
“So it’s a sudden increase in demand and following that, we had a fairly cold winter even before this polar vortex hit,” McCafferty said.
As that demand lowered propane inventories, infrastructure changes also slowed transportation of the gas.
A pipeline that provides 40 percent of the propane used by Minnesota suppliers was shut off for maintenance. And Canadian imports have been affected by a rail rerouting that forced some retailers to get their propane from other sources, the association said.
Propane is primarily transported by pipeline and then by rail, Mollie O’Dell, a spokesman for the association, said in an email.
Propane exports also increased last year. More than 20 percent of U.S. propane was exported in 2013, up from 5 percent in 2008, according to the national association.
But U.S. production has also increased. Last year, an estimated 16.3 billion gallons of propane was produced in the country, compared with 14.9 billion gallons in 2012, O’Dell said.
Earlier this month, Gov. Mike Beebe declared a propane shortage to allow supply trucks to travel through Arkansas without obtaining a license or permit from the state.
The order was issued to help propane distributors who are having to travel farther to pick up supplies, said Matt DeCample, the governor’s spokesman.
The Transportation Department issued a federal order earlier this week. The state and federal orders expanded the number of hours a day that distributors may deliver propane to customers, Bowman said.
Business, Pages 27 on 01/24/2014